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The word “investor” is quite a general term that means different things to different people. Dictionary.com defines an investor as “someone who commits capital in order to gain financial returns”. So what does this mean in terms of real estate investing? There are three types of investors: lending, equity and hybrid (or combination). Here is a breakdown of these three types of investors.

A lending investor is someone who will loan you money on a real estate deal. You will pay them an interest rate and you retain 100% ownership of the property. You will pay them back on certain terms at a certain time.

An equity investor is someone who will give you the money but they want a percent ownership in the property. In return, they get a percentage of the cash flow and a percentage of the appreciation. They are going to cost you more money but they may have some other benefits such as not requiring any monthly cash flow.

A Hybrid or combination investor is someone who can receive an interest rate and equity participation in the project.

From the investor’s point of view, whether they choose to be a lending, equity or hybrid investor depends on their needs. We are talking about mutual needs. Do they need monthly income or do they desire something for the future? It is a meeting of the two objectives and this is where you get down to their investor profile. You want to match your investment product to their profile.

The documentation for the type of investor will vary. This is in reference to once they have committed to the multifamily deal and the documents that you will put up to define the transaction and to create the promissory note and security instrument. This will be easier with a lending investor.

All three of these types of investors have merit. As a general rule, lending investors are preferred because you do not have to pay as much return. Equity investors are going to end up costing you more money but they may have the benefit of not needing any monthly cash flow.

One type of investor is not necessarily better than another. It really is dependent on what suits your needs at that point in time. Generally speaking, you will pay less return with a lending investor.

Knowing what investor you need to deal with on a project is very important. If you know the type of investor you are dealing with then you will know how to “package” the product. You will be able to determine how to match your investment product to their needs and meet your needs as well.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

Target marketing is defined as the “market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics.” (Wikipedia) Target marketing is not limited to other businesses out there. It plays a significant role when you’re marketing your multifamily deals.

There are many facets to marketing. You want to be sure you target market. The more you can target market, the more precise you can get with your benefits and the more likely you will find buyers and investors.

Here are some possible target markets:

1. People looking for retirement funding
2. People that need income or more income
3. People looking for more passive income
4. Nurses in real estate
5. Women in real estate
6. Teachers
7. Realtors

The list can be endless. The only limits are your imagination. Be creative and don’t hesitate to think “outside the box”. The more you can narrowly define the group, the more you can tailor your multifamily deal to meet the needs of that group. You will be able to emphasize the features that are attractive to that demographic.

Once you have a target market in mind, you can then, in turn, create your Investor Profile and modify it to ask the right questions of your potential group of investors. Just remember that the features that one target market might find attractive may not be the same features that another target market is looking for.

For instance, a multifamily property located in a high crime area that needs a lot of rehabilitation is more than likely not going to be something that an elderly lady looking to maximize her retirement money is going to be interested in.

If you have colleagues, do not forget to include them. If you have associations with other groups of people such as those who share a hobby or past-time with you, you can possibly count them as well. If you sit on the board of an organization, you might very well have potential investors there waiting for an opportunity such as yours.

Remember, define your target market and then focus on relating to why they need the money. A great deal of your success in closing a multifamily deal may come from your ability to hit the features that are attractive to your target market. The more you can emphasize the benefits of your deal, the more you will be able to grab their attention and be able to sell them on it.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

When you sit down and examine the advantage of owning multifamily properties, you will be amazed at the multitude of benefits. While other avenues of income generation offer some attractive incentives, owning multifamily properties brings many great things to the table. Let us explore these advantages:

1. You can outsource your property management to professionals. You don’t have to be bothered by tenants and toilets. Even if you have smaller properties, you can hire property managers. Leave the headaches to them and go on vacation! The property doesn’t own you; you own the property.

2. You can buy with NONE of your own cash. You can raise private money to cover any cash requirements. You will find that it’s easier to get financing on apartments and that the MORE you borrow the LESS they look at the borrower’s credit. In some instances, they don’t even look at the borrower’s credit but at the borrower’s assets instead.

3. Apartments are made to cash flow even with nothing down. This means that instead of there being one house with one roof generating only one source of income, you have one roof with possibly multiple apartments under it creating multiple income streams. You have economy to scale. Apartments are designed to be income-producing properties.

4. Better leverage of your time and effort. Think about it. What would you rather do? Look for ten houses or a ten-unit apartment building? On the flip side, wouldn’t you rather sell a ten-unit apartment than sell ten houses? Of course! You have more leverage of your time.

5. The value of income properties is based on income. This is a function of Net Operating Income (NOI) and you can create value by raising the rents and cutting the expenses. This is a very predictable process. You can determine how much the property is worth based on how much you raise the rents.

6. Less competition. There are less people out doing multifamily deals than single family deals because they lack mindset and they lack specialized knowledge. They have limited themselves by the mindset that says they must graduate from single-family homes to multifamily properties.

7. There is less risk. With multiple tenants you have multiple revenue streams. If you lose one client, it’s not the end of your business. On the other hand, if you are relying on a house as your sole source of income and you lose that tenant, you are still pouring money into that house. There is mitigated risk through apartments.

8. Non-recourse financing. The more money you borrow, the easier it is to borrow. When you get to loans of two million dollars and above, it becomes non-recourse financing which means the asset is the sole security for the loan. No one is personally guaranteeing the loan.

9. Condo conversion. This has been very big in some parts of the country such as Denver and Tampa. As an example, you would take a fiveplex, convert it into condos, and then sell the individual units. It is a different strategy because you’re putting all your cash forward and then pulling out. It’s not a long-term hold strategy.

10. The sub prime lender bust. With sub prime mortgage lenders falling out of the market, there are people cannot qualify for home loans. These people have to live somewhere so the demand for rentals is skyrocketing.

As you can see, the advantages to owning multifamily properties are solid and sound. With so many venues to consider when trying to find something to generate passive income for yourself, you just can’t overlook the tremendous value created by multifamily properties.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

When you are looking for investors for your deals, you need to have a process in place to help you determine which investors will suit the deals you are looking at. Try thinking of it like a job interview; you need to have questions in place to help you find the right “candidates” for your projects. Your goal is to create a stable of private money sources that you can put into the deal depending on the type of deal. Here are the questions that you need to be asking when talking to investors.

1. What is the reason for investing? You need to find out why they want to invest. You need to take the approach that you are someone who is willing to listen to what the investor’s needs are as opposed to someone who just needs their money.

Some common reasons for investing are paying for a college education or a second home or to set aside money for retirement. If you are armed with this knowledge, it can help you fit the right deal to the investor.

2. Have they ever done any previous real estate investments? The answer to this question will help you determine how much “hand holding” they require once the deal gets under way. The more experience they have, the easier the process will be.

3. What is their risk tolerance? Are they looking for low risk or high risk deals? You don’t want to try and match a little old lady who has money in CD’s with a multifamily property that’s located in a high-crime, drug infested neighborhood.

4. How much do they have to invest? Most of the time, an investor will not give you everything they have up front. They want to test you first. They may say they have $10,000 to work with. That’s ok.

You can then ask them if you can contact them if you have a deal that requires $100,000. If their answer is yes, then you have a good idea that they are playing for bigger stakes. Any answer but “no” could eventually mean a “yes” in the long run.

5. Could you refer me to others? Once you take care of the investor, and they are satisfied, you need to ask them to refer you to friends and family. This is a very powerful tool because it leads you to other deals.

These five questions are the minimal amount of information you need to gather from your potential investors. The information you gain from the answers to these five questions gives you great insight as to what deals you are working on will match up with the investor.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

When you are preparing to get into real estate investment deals, it is very important to consider what entity you would like to establish in order to proceed. There are typically two ways to do real estate deals. The two most common entities are the Limited Liability Company and the Limited Partnership. These two entities offer the most flexibility and are the ones you encounter most frequently when acquiring or holding real estate.

The Limited Partnership is where you have a general partner or “sponsor”. There are limited partners who are putting in money. Let’s say you have a $500,000 deal. You could have 10 lenders putting in $50,000 each. The general partner generally puts in no money. You or your entity would be the general partner to run the project.

You did the leg work and found the deal; you did the analysis, and got it under contract. Once it closes, you will be the asset manager, hire the property management company, manage the property management company, and increase the value of your asset. The limited partners can be individuals. Their liability is limited to the amount of their individual investment.

So in our case, they would only lose $50,000. The general partner, however, takes on all the liability. That is why you want the entity as the general partner and not you personally. The Limited Partnership is particularly valuable on properties that you want to hold and you can get liability insurance to protect the property as well.

The Limited Liability Company is very flexible. You can have one with a sole member or one with 10 members. You have a manager and members. The members are passive and the manger(s) are active.

You can have the LLC’s own your properties and you can create a new LLC for every property to keep it segregated. You can buy a multi-family property and have the LLC take the title. You can have lenders to your LLC.

You can be a manager and a member of the LLC. The LLC can own the property. You can control the LLC but the LLC owns the property. You only own interest in the LLC.

So when you are making your preparations for real estate deals, be sure and examine your options when it comes to creating an entity. Consult with your attorney. Again, you want to be sure that you go with the best option for the deal that is on the table.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

When you are trying to pitch potential investors a deal, you have 20 seconds to catch their imagination. In that 20 seconds, you need to address the investors’ “What’s in it for me” mentality. You need to talk to their reasons “why” they need the money. You need an “elevator speech”.

Here’s an example:

I have the perfect deal for someone with $75,000 in your IRA looking to earn 15% APR over the next 6 months. You can earn 15% APR on a sustained basis if you choose. You won’t need to keep reworking your IRA money anymore. All of our deals are validated by third party appraisals and third party rehab costs. The projects are run by a very experienced rehabber who has done 8 house rehabs on budget in the last 24 months. I have a flyer with all of the benefits on the table. I will be in the back of the room. My name is Lance. Come see me during the break.

Let’s break it down. This pitch is very specific:

“someone with $75,000 in your IRA looking to earn 15% APR over the next 6 months. You can earn 15% APR on a sustained basis if you choose.” – You are giving them a choice on how they can earn their 15%.

“You won’t need to keep reworking your IRA money anymore.” – You are presuming that there is a problem.

“All of our deals are validated by third party appraisals and third party rehab costs.” – You don’t go into detail but you assure them that there is nothing to worry about. You have the bases covered.

“The projects are run by a very experienced rehabber” – You are selling people the experience or your team. People feel secure with experience.

“who has done 8 house rehabs on budget in the last 24 months.” – this solidifies your statement of experience.

“I have a flyer with all of the benefits on the table. I will be in the back of the room. My name is Lance. Come see me during the break.” – You’re not waiting for a phone call; you are ready to talk right now.

Be sure that your elevator speech addresses at least some of the benefits of control, low risk and high return. If you get their attention, they will come talk to you and then you can highlight the features of your deal. The key is to grab their attention. Once you have accomplished that, you can go over the particulars of the deal.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

Everyone likes a great deal. You may have everything in place to put together a multifamily deal but do you know how to make it a great deal? Do you know how to do it in such a way that it will not cost you too much? Here are some great pointers on structuring your multifamily deal.

Structuring your multifamily deal is creating a deal that allows the private money source to feel comfortable with the amount of control and allows for minimal risk. The first thing an investor is interested in is whether they will get their money back. Or they are interested in the preservation of their capital. Both of these concerns address the investor’s comfort level of the deal. What you need to focus on is publicizing the features of your deals that provide control and low risk for your private investors.

Control means such things as the private lender or investor never releases the money until some promised event has occurred. For example, the lender or investor only releases the 20% down payment to an escrow at closing rather than to you directly. Another method that allows the lender or investor to have control is to have the lender only release rehab monies when they have certified that certain parts of the rehab are complete. This is part of the strategy of preeminence. You are showing your private investors that you thought of their interest when you set up the deal.

Low Risk means that the investor believes that their investment is secure. This is one of the great things about real estate because you have a hard asset that serves as collateral. Part of the security comes from the loan to value ratio because that is a hard asset and in the worst case scenario, if you don’t perform to their expectations, the investor can get access to the property and that redeems their investment. For income producing property, the primary indicator of value is how much income it produces which is easily ascertained.

The more time you spend on Control and Low Risk, the less time you will have to give in return. If you are setting up your multifamily deals from the start to allow your investor to have a sense of control as well as allow them a low risk comfort level, then you will save yourself time later on. Your goal is to set up a deal in such a way that the person involved is better off even if they do not buy from you.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.

When locating private monies for your real estate deals, there are the four key elements of being successful: Predisposed investors, control, low risk and high return. However, there is another element to making your hunt for finding investors successful. This fifth component is called the strategy of pre-eminence.

Think of the strategy of pre-eminence as you would The Golden Rule: “Do unto others as you would have them do unto you.” It is really that simple. You take a pre-eminent position and treat every client as you would like to be treated. This means that you have a vested interest in what type of deal they are looking for.

This strategy begins with being sure to refer to your investors as “clients” as opposed to “customers”. Client denotes someone you are going to look after in the long run while customer denotes a one-time transaction. Client is a long-term relationship.

Your private money sources are your clients. You are creating investment products for them. They expect to receive benefit from that. Because you want to have a long-term relationship with them, you treat them as a client.

Think of it this way: you are a customer at the chain jewelry store. You are just a nameless face among thousands there. No one there has a vested interest in finding out what your needs are and what they can do for you. However, if you go to your local jeweler, they will treat you as a client. They will get to know you on a personal basis and work for your repeat business.

This means that you look after them; you think like they would. You try to put yourself in your client’s shoes and look out for his or her best interest. Honesty is always the best policy. If you fudge on giving the details of a multifamily property to your potential investor, not only do you risk losing them but you risk destroying your reputation that you have built thus far.

Remember, referrals are the backbone of your business. You cannot build up your list of credible and trustworthy references if you develop a reputation for not being an honest person to deal with.

Your ability to establish a relationship of trust, reliability and integrity is the foundation for a relationship that will be mutually beneficial in the long run. The strategy of pre-eminence opens the door for you to garner stellar word-of-mouth referrals from your clients.

Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.