Creativity in Multifamily Investing
Posted: Tuesday, September 01, 2009
by Lance Edwards
First Cornerstone Group, LLC
When people think of multifamily investing, they often think that it's a numbers game and therefore full of rules that restrict. But rules were made to be broken and real estate investing is a business that requires a healthy dose of creativity! In this article, I want show you why it pays to be creative. So go ahead and break the rules!
In one deal, a student of mine was working with a broker to buy a property. Unfortunately, it was a mess and there wasn't a lot of margin for the broker to get paid. This is where we got creative! The deal was structured to pay the broker one-third during the deal and two-thirds over time.
If you need contracting services done on your multifamily investment, but don't have the money to have the work completed, see if you have a service that they want in exchange. If they don't need your service directly, see if there is a service that a third party that you can provide your service to, who will, in turn, perform the needed service to your contractor. It's called triangulating a barter exchange. It's a great way to get work done at a low cost, especially if you have skills that are in high demand.
A third example shows another way to save money to get work done. There was a large deal that required a lot of due diligence. The investor went to the property management company that was being considered for the role of managing the multifamily apartment in the future and he offered them an equity share in the apartment if they would put up some of the money upfront to perform the due diligence. This is another way to drive down costs through innovation.
Of course, by way of clarification, I'm not talking about breaking laws or destroying trust between various parties in a deal. But the bottom line is this: If you focus on getting the deal done, and you treat every problem like an opportunity, you'll have greater success. Here's why.
First, your projects will move faster and won't stall as often because you're able to creatively address challenges as they arise. Second, your projects will be more profitable because you'll be able to keep costs down. Third, you'll create a bank of happy peers who come out ahead because of your creativity, which means they will be valuable contacts for future deals. And fourth, you'll toolbox of ideas that is filled to overflowing so that every deal, no matter how complicated, can be structured and completed profitably.
So, how can you be creative and break the right rules to come out ahead? It's easy: Find out what motivates the various parties in your deal and do what you can to give it to them. Keep one goal in your mind as you work - that of closing the deal. And, always, always, always ask yourself "is there another way to do this?"
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Think you need big cash and experience to do apartments? Well, Lance Edwards is living proof that you can start with multifamily investing - just like he did and using none of his own money. Utilizing the multifamily apartment strategies he now teaches and writes about, Lance retired from his job in July, 2005. For more information on how you can achieve financial freedom using other people's money, visit http://www.ApartmentWealthMachine.com
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