Millionaire Real Estate Investing with Jim Pellerin
Episode #69 - You Need an Autoresponder to Manage Your Email List

Episode #69 - You Need an Autoresponder to Manage Your Email List

July 24, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... Β then click this link invest.jimpellerin.com

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One of the things that are important in email marketing or in real estate investing or in marketing in general, is building up an email list. I mentioned that in one of my other posts. But what is also important with an email list is you have got to have a tool called an autoresponder. πŸ“§πŸ’πŸ–²οΈ

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An autoresponder is a tool that will be able to send out messages to people at a predefined period.Β 

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An autoresponder will allow you to collect an email list and usually have capture pages that you can create to use upfront. Part of the capture page is a capture form that you can embed into any webpage and you can usually do that very easily. These autoresponders may provide you with a script that you can just insert into any page if you know how to do that, or you can get somebody on Fiverr to do that for you for like $10.πŸ–²οΈπŸ“§πŸ“–πŸ“„

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Then what happens is when people go to your page and they are usually trying to download your lead magnet, this free report, and so they will put in their email. That email gets added to this autoresponder list. Next, the autoresponder will send out a first email, which should be something like, β€œHey, thanks for requesting this free book on how to become an investor in real estate”. And then you email it off to them. That is the first email that they send out. πŸ‘¨β€πŸ’ΌπŸ“§πŸ–²οΈπŸ“™

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In the autoresponder you will have defined that you want to send out another email every 2 or 3 days or 5 days or 10 days or every day or twice a day, depending on what you think you need to do to keep your list, to keep your people interested in what you're trying to offer. πŸ–²οΈπŸ“§β³πŸ€

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In the case of real estate investors what I do is I post a blog every day.

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For example, I make these videos that we are doing. I transcribe them. I rewrite them. I put some more information in there and I dress them up. I headline them, I annotate them, and then I create a blog post, just like this one. Next, I send out an email to my email list of investors with a link to the blog post every day. So, they get to see a β€œblog of the day” from Jim Pellerin, and then they can read that or not. πŸ–¨οΈπŸ“§πŸ“„πŸ‘¨β€πŸ’Ό

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The other thing the autoresponder will do is it allows the people that don't want to have any more contact with me to unsubscribe from my list, which is good. Because I don't want anybody on the list that's not going to be a potential business partner of mine, whether it's through a real estate transaction or it's a motivated seller.πŸ–²οΈπŸ‘¨β€πŸ’ΌπŸ“žπŸ’²

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Do not look at unsubscribes as bad.Β 

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The other thing autoresponders can do is report on the activity associated with your email marketing campaign.Β 

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This will be things like open rates. This will be the number of clicks that people do. This will be the number of blocked, not blocked, and bad emails. Eventually, somebody may change their email and their old email is no longer any good. The autoresponder will flag that, and it won't try to send it to those people again. πŸ–±οΈπŸ‘¨β€πŸ’ΌπŸ“§

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An autoresponder will show you the number of bounces which means people who opened the email but then get out of it really fast. It can also show you the number of people who unsubscribed from your list. πŸ–²οΈπŸ”’πŸ“„

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An autoresponder gives you all the statistics associated with your email marketing campaign.Β 

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So, it is important to have an autoresponder to do your email marketing campaign. πŸ–²οΈπŸ“§πŸ“Š

Episode #68 - Potential Customers Need To Be Nurtured

Episode #68 - Potential Customers Need To Be Nurtured

July 23, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... Β then click this link invest.jimpellerin.com

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Some people think that when they are looking for partners or investors or sellers that they only need to talk to them a couple of times. πŸ‘¨β€πŸ’ΌπŸ€”

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Potential customers need to be nurtured.Β 

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What that means is they need to be in constant communication with you and you need to be helping them understand what it is you do. I have had people invest with me who I have never talked to before and who had been following me for a year. And they finally contacted me and say, β€œHey, listen, I've been looking to invest in real estate. What can we do?” πŸ“žπŸ—£οΈπŸ’°β³

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Something might have happened in their personal life and, and something might have made it so that now is the right time for them to invest.Β 

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The main idea behind nurturing prospects is building a relationship.Β 

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A lot of people will not take the time to nurture their prospects. I see it all the time on LinkedIn. People come in and they request a connection with me on LinkedIn. I will usually accept it right away. Then I get this auto message β€œHey, Jim, I'm this guy that does this. If you'd like to get on the phone with me right away let's do so.” I unfollow right away. πŸ•πŸ‘¨β€πŸ’ΌπŸ€βœ‰οΈ

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Nurturing isn't just done through emails. It's also done through your social media.Β 

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For example, on LinkedIn, you want to say, β€œHey, great connecting with you. Let's keep in touch.” Then maybe a couple of days later, you send them a message about this article on something that might be of relevance to them and you in whatever your commonality with that person is. LinkedIn nurturing is similar to nurturing your email campaign. πŸ“žπŸ—£οΈβ³πŸ“„

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Nurturing is about building that relationship.Β 

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It's continuously maintaining contact with that person. There's a book out there called Jab, Jab, Jab, Right Hook by Gary Vaynerchuk. And what he says is you go out and you give them content and more content all the time. So at least three pieces of content. For real estate, it could be something about your geographical area. Like talk about the house prices in your area; talk about mortgage rates in your area; talk about some trick to do with real estate investing; Put out three different pieces of content. Then maybe on the fourth one or the fifth one or the sixth message, then you can say, β€œHey, listen, I've got this program that you might be interested in. Would you like more information about it?" or maybe you could say, β€œHere's a link to an upcoming webinar that I think you might find interesting. You should check it out.” Or β€œhere's another piece of content that you might be interested in”. πŸ“ˆπŸ“žπŸ‘¨β€πŸ’ΌπŸ“™

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And what you could always do on these emails/messages is you should always put your link at the bottom for information purposes only. It doesn't have to be a hard sell.πŸ“§βœ‰οΈπŸ—‚οΈ

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Remember, the idea is you are trying to build up a relationship. 🀝

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You are trying to build the relationship to the point where these people know, like, and trust you.Β 

A lot of these influencers out there, that's what they do. That's what guys like Grant Cardone and Gary V do, right. They've built up a huge following because they are constantly putting out content. And then when it comes time to promote anything they send an email to their list. In the case of grant Cardone, if he's promoting one of his courses or one of his books or whatever, then he'll do a special event just for that. πŸ‘©β€πŸ’ΌπŸ‘¨β€πŸ’ΌπŸ“„πŸ“§πŸ—‚οΈ

Episode #67 - What is Your Elevator Pitch

Episode #67 - What is Your Elevator Pitch

July 22, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... Β then click this link invest.jimpellerin.com

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One of the things you need to do in real estate investing is come up with an elevator pitch. πŸ˜οΈπŸ›—

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You need an elevator pitch, especially if you are looking at dealing with investors because those investors, they're pretty busy and they're looking for a way to make money. They want to get into real estate investing, but they don't really have a lot of time and they don't want to spend the time managing all the intricacies of real estate investing. πŸ›—πŸ€ΎπŸ‘¨β€πŸ’ΌπŸ’°β³

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You need to be able to tell potential investors really fast, what you can do for them.Β 

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Here’s an example of an elevator pitch, β€œHey I'm involved with real estate investing. I help people that want to do real estate, who don't have the time to do real estate to make money and become financially independent. If you'd like more information, I'd certainly like to spend some time with you. If you want, we could set up a meeting to discuss.β€πŸ›—πŸ€ΎπŸ•’πŸ’²

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And then the next follow-up would be to either send them some marketing materials or set up a meeting with them and walk them through your pitch deck.Β 

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For a motivated seller, an elevator pitch might be something like β€œI help people in difficult situations by providing them with alternatives to foreclosure and to bankruptcy.” If you're working with a motivated seller, a lot of these people are in those situations where they're looking for solutions, right? πŸ›—πŸ€ΎπŸ¦

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The idea behind having an elevator pitch is that you are trying to get the person's interest.Β 

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An elevator pitch is like a headline in an ad that you're running, right? So the concept is that you're getting their attention. And then you're trying to get them to the next step, which is usually booking a meeting or booking a phone call.πŸ›—πŸ€ΎπŸ—žοΈπŸ“ž

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I wouldn't just send over information without a meeting.Β 

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You should never send information to potential customers without having a conversation first, or at the very least, without having a call.Β 

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Information should be provided after a call. So, for example, if you have a potential investor, you get them on the phone, you talk to them, you tell them what you're doing. A lot of these calls should be about building rapport and building relationships with these people. Getting them to know you, getting them to trust you. Once you do that, then you can do some follow-ups and say, β€œI'll give you some information and we can do a follow-up conversation.β€πŸ“žπŸ‘¨β€πŸ’ΌπŸ‘©β€πŸ’ΌπŸ—£οΈΒ 

So, the elevator pitch gets you started, then you implement what I call negotiation tactics. And also your sales processes are important here as well.

Episode #66 - What Real Estate Investment Strategy Do You Specialize In

Episode #66 - What Real Estate Investment Strategy Do You Specialize In

July 21, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... Β then click this link invest.jimpellerin.com

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One of the things you need to do in real estate investing is you want to make sure that you are specializing in something. 🏠πŸͺ‘βš’οΈ

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I meet a lot of people and when I start talking about real estate investing and I ask them, β€œso what real estate investing, what type of real estate investing are you in? Are you in wholesaling? Are you in rent to own? Or do you do fix some flips? Are you in rentals?” πŸ πŸ·οΈβš’οΈ

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A lot of them, strangely enough, say β€œI do whatever transaction comes along”.Β 

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And that may be the case but it's going to really make you think.Β 

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What's going to happen is you're not going to become an expert in any one thing.Β 

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There are two things you need to be doing as a real estate investor. You need to be looking for motivated sellers and you need to be looking for joint venture partners, people with money.πŸ‘¨β€πŸ’Όβ€΄οΈπŸ€πŸ‘¬πŸ’°

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What you want to do when you're out there looking for properties is you're looking for a motivated seller πŸ‘€πŸ πŸ‘¨β€πŸ’Ό

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There are four things you can do with any property.Β 

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  1. You can bring it on as a lease option. πŸ’²βš’οΈ
  2. You can wholesale it to a cash buyer.πŸ’²πŸ‘¨β€πŸ’Ό
  3. You can fix it and flip it, or βš’οΈ
  4. You can fix and hold it. βš’οΈβœŠ

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What you need to do is you want to specialize in one of those things.Β 

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For example, my specialty was lease options. What I would do is I would find a seller that would be willing to do a lease option with me. But if that property was run down too much, I wouldn't be able to do anything with it because I didn't have a team in place to fix it up.πŸ’°πŸ‘¨β€πŸ’ΌπŸ βš’οΈ

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What I had is I had a partner or I had people that I would assign this property to. So I would get it under contract, I'd flip it over to them and they would fix it up and then they would just sell it. And I'd get a commission for that. πŸ‘¨β€πŸ’ΌπŸ πŸ“œπŸ’²

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I didn't have to worry about building a team to do fix and flips for the odd fix and flip.Β 

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In fact, if you're doing fix and flips, you want to make sure that if that's your specialty, you build a team or two or three teams, depending on how fast you want to scale. Because fix and flips can take anywhere from three to six months. You want to make sure you can rotate your teams through these different transactions. πŸ‘¬πŸ“Šβš’οΈβ³πŸ’²

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I know people that have done a hundred deals in one or two years, I know a guy who's done a thousand transactions, but the key is having a specialty and then find other people that can do the work that you don't want to do or that you don't need to do.πŸ‘¬πŸ€β³

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Then you can work with them and they can become your partner in the transactions that are not your specialty.

Episode #65 - Define Your Overall Brand

Episode #65 - Define Your Overall Brand

July 17, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... then click this link invest.jimpellerin.com

One of the things you have to do when getting started in real estate investing is you have to build a brand.πŸ’²πŸ πŸ·οΈ

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By brand, I don't mean just having a nice logo. It's your colors? Is it your website? It's all the materials that you create. πŸ—ƒοΈβœοΈ

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It's not like building a brand like Coke builds a brand or how Nike built a brand.Β 

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What do I mean by a brand? It's about you getting known for what you're doing.Β 

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For example, when I started the big thing I was doing was lease options and I built a very strong brand about lease options. When people were looking for properties as, as a tenant buyers, they knew that this company that I had was going to be able to provide them with a lease option. When sellers were looking to get out of a property they had, they knew that I was the person to go to if they wanted to lease option the property to me. βš’οΈπŸ’ͺπŸ‘€πŸ 

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The other people where you're going to build a brand and where your brand is going to get built the best is through working with professionals. πŸ€πŸ‘¨β€πŸŽ“πŸ‘

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For example, I had a number of mortgage brokers that knew I was in the rent to own the lease option business. So when they had a person that couldn't get qualified for a mortgage, they would call, they would contact me right away and say, listen, Jim, I've got somebody here that might fit your program. πŸ“žπŸ‘¨β€πŸ’ΌπŸ’―

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So there you're building a brand, which means the referrals are going to come through because of that brand. Now, I wouldn't want you to rely on a referral-based business because it's very hard to scale and it's not very reliable. Part of building the brand is going out and marketing and running ads so that people start seeing your information.πŸ’πŸ·οΈπŸ“Š

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It really helps your brand if you're putting out content too. You want to put outposts on a regular basis, whether it's a blog post, or whether it's a Facebook post talking about what you can do. 🏷️πŸ–₯οΈπŸ“§

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For example, how to make money in the real estate market. Or how to make money through lease options. Or how to acquire a property. And, and when you're doing that and building your brand with real estate there are always two sides of it. There's the seller side. And then there's the buyers side or the investor side. πŸ’°πŸ˜οΈπŸ·οΈ

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So you want to be building both sides of the brand at all times.Β 

But the idea behind your brand is that you want to build a name for yourself that people are going to trust so that when it comes time to need you, they're going to be aware of you, or they're going to be able to do some digging if they do a search on your name, for example, Jim Pellerin, and they'll be able to see that you are a real estate investor and that you can help them either as a seller, as an investor, as a buyer, as a cash buyer. So looking at all different aspects of what you have to offer. πŸ·οΈβš’οΈπŸ‘¬πŸ‘€πŸ’°

Episode #64 - Who Are Your Ideal Customers

Episode #64 - Who Are Your Ideal Customers

July 16, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... then click this link invest.jimpellerin.com

So, when starting to do your marketing for real estate investors, you have to define who your ideal customer is. And depending on the type of real estate investing you're getting into, that will be different. πŸ‘ŒπŸ‘¨β€πŸ’ΌπŸ 

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For example, if you're doing rent to own investments, you want to know who your ideal customer is for the seller. You want to know who your ideal customer is for your tenant-buyer, right? And these are both sides of the transaction. πŸ’²πŸ‘ŒπŸ‘¨β€πŸ’Ό

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So for example, for the seller, it's somebody who is willing to participate in a transaction with you. They continue to stay on the property, but they lease option a to you. When I do lease options, I like to do what's called a sandwich lease. πŸ‘©β€πŸ’ΌπŸ’°πŸ₯ͺ

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And then on the other end is the tenant-buyer. It's somebody, who's got a good down payment who just had one blemish on their credit score. Either. They went through a one-bed situation, and they're trying to repair it, but they can't get a mortgage right now. πŸ‘¨β€πŸ’ΌπŸ’²πŸ’³βš’οΈ

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You look at both ends of the transaction in fix and flip in a similar way. Who are you looking for? You want a motivated seller. We talked about that in several other videos, but you need both ends of the transaction. You have a motivated seller. There's actually three in this transaction. You have a motivated seller. You have the investor, the money partner, and then you also have the buyer. Although with the buyer, you don't really care who they are, just as long as they purchase your property. And this is after it's fixed. Right?Β  πŸ‘€πŸ‘ŒπŸ‘©β€πŸ’ΌπŸ 

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When looking for properties, you want a motivated seller, somebody that is in a situation where you could purchase a property at a discount.πŸ‘€πŸ πŸ’°β€΅οΈ

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So it makes sense for you to acquire it and put it through your fix and flip operation where you will end up making money and your investor will want to make money.Β 

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The ideal customer when looking for your investor is you want to make sure this person doesn't want to have a lot of involvement in your transaction. You can keep them up to date on a regular basis, like once a week saying, you know, things are going well, transactions in progress. But somebody who wants to be on the job site and looking at the kinds of materials you're putting into this property, that's not the kind of partner you want in a joint venture partner. πŸ‘¨β€πŸ’ΌπŸ‘€πŸ’²β³πŸ‘

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You want a joint venture partner who is going to be silent. πŸ‘¨β€πŸ’ΌπŸ€«

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So, when you are starting out, make sure you define who your ideal customer is that you want to work within these different transactions, depending on the real estate transaction that you're doing. πŸ‘ŒπŸ‘¨β€πŸ’ΌπŸ’°πŸ 

Episode #63 - Why Invest In Mobile Homes

Episode #63 - Why Invest In Mobile Homes

July 15, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... then click this link invest.jimpellerin.com

Another property you can invest in is mobile homes or mobile home parks, which is interesting. πŸ πŸš—

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So, what is a mobile home? It's a home that it's usually a trailer type home. So what happens is you buy the unit and you put it on leased land or you put it on the lot. You put it on a lot in a mobile home park. These are parks that are designated for mobile homes and they have services like water and electricity at each one of those lots. πŸ’°πŸ πŸŒ³

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The big advantage of owning a mobile home is it's cheap.Β 

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You can buy a mobile home cheaply. I have seen them for sale for $3,000, $10,000, $20,000. A home in the same area might start in around $70,000 to $100,000 or they could go up to $300,000, even though the mobile homes are only $30,000.πŸ’²πŸ πŸš—

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Why people want to rent mobile homes is because the rents are also cheaper.Β 

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Instead of paying $1,000 a month for rent, a mobile home could be only $600 a month. πŸ πŸ’°β³

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The disadvantage of mobile homes is that you are usually renting to people that can't afford to rent a house. So you're usually renting to, and I hate to say it, but β€œproblem” people. There is a negative stigma associated with people who live in mobile homes. They are people that don't really care about their things and you can see that in some mobile home parks. They even call these people β€œtrailer trash”. πŸ§β€β™‚οΈπŸ πŸš—πŸ—‘οΈ

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The one interesting advantage of a mobile home purchase is you can recover your expenses right away, or you can recover your costs right away. πŸ πŸš—πŸ’²β€΄οΈ

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For example, let's say you purchased a mobile home for $5,000, and I've seen that. If you rent it out to somebody for $500, you are recovering the cost of that investment in as little as 1 year. You can actually pay off your full investment in a year. πŸ’°πŸ β³

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Theoretically, you say, well, I don't really care what happens to the property after that. I'm just going to rent it out and I'm going to make any additional income because now I own this property free and clear. I mean, there are some expenses in there. Because you've got to pay the mobile home park fees, the lot fees. πŸ βž•πŸ€‘πŸ“ˆ

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What some people do too, is they actually buy the whole park, which is another strategy altogether. I've seen people do that, you know? So you go in, and you buy a park which has got 200 or 300 units in it. So it's like buying a large apartment building or a multifamily home. So it’s an exciting investment, purchasing a mobile home park. πŸŒ³πŸ˜οΈπŸ‘¨β€πŸ‘©β€πŸ‘§β€πŸ‘¦

Episode #62 - You Need To Seek Professional Help When Investing In Real Estate

Episode #62 - You Need To Seek Professional Help When Investing In Real Estate

July 14, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... then click this link invest.jimpellerin.com

I hear a lot from people about trying to get started in real estate and they are trying to save money. So, they are trying to do everything themselves. πŸ‘¨πŸ πŸ’°

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When I first started, I remember I was doing my own offers. I was doing my own contracts. I was even doing my own loan agreements. All of my own agreements. I drew them up. πŸ‘¨β€πŸ’ΌπŸ€

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So, here is my first big recommendation … 

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when getting started in real estate you always want to use professionals. πŸ‘©β€πŸŽ“πŸ‘¨β€πŸŽ“

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Professionals are going to protect you legally. They're going to protect you financially. They're going to get the job done, right? They're going to take up less of your time because they're doing it right. Don't think that you're saving money by trying to draw up your own contracts. You're going to get in trouble. πŸ‘¨β€πŸŽ“πŸ’²πŸ“œ

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So, I recommend using professionals. And when I say professionals, I'm also talking about realtors.

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People try to avoid realtors. I saw a post from a guy in this forum the other day. He was asking β€œhow could I buy a property from somebody that's listing it without having to pay the realtor fees”? And he's purchasing the property. So it wasn't him that was paying the realtor fees. He was trying to figure out a way to screw this realtor who had listed the property. I told him, I said β€œlisten, buddy … you're not the one paying for the realtor fees. Just let the realtor do their job.” πŸ‘¨β€πŸ’ΌπŸ πŸ’°

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And his thought, was, if he didn't have a realtor, he could negotiate with the listing realtor to get a reduction in price or with the seller. I mean, the seller hired a realtor. They are willing to pay that 5% or 6%, whatever it is. You as a purchaser and don't need to pay those costs.πŸ‘¨β€πŸ’ΌπŸ—£οΈπŸ’²

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When you are listing a property, you want to make sure you're going to use a realtor. People boast all the time, β€œI listed my property. I sold it in one week”. Well, to me that tells me that they are in a very hot market or they listed their property too low. There have been studies showing that private sales actually lose money compared to listing with the professionals because they don't know what they're doing. They don't know the comparables. They don't know the right price to ask. They ended up holding the property for a lot longer. So always use a realtor. πŸ“œπŸ β³πŸ’ΈπŸ‘¨β€πŸ’Ό

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Do the same thing with a mortgage broker … you always want to use a mortgage broker, because you want to get the right financing. Do not go directly to the bank. They will only have access to their products. πŸ§‘β€πŸ’ΌπŸ’°πŸ¦

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And obviously, you want to use a lawyer when doing the transactions. πŸ‘¨β€βš–οΈπŸ¦

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So, when investing in real estate, make sure you are using the right people. Do not try to do everything yourself. Work with the professionals. πŸ”ŽπŸ πŸ‘¨β€πŸ’ΌπŸ‘¨β€πŸŽ“

Episode #61 - Why You Need A Mortgage Broker

Episode #61 - Why You Need A Mortgage Broker

July 13, 2020

If you would like to learn more about real estate investing and how you can scale your business and build a large portfolio fast ... then click this link invest.jimpellerin.com

I get a lot of questions from new real estate investors asking β€œdo I need a mortgage broker?” My answer to that always is yes. πŸ‘¨β€πŸ’ΌπŸ‘

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The reason why is, if you looking to get a mortgage you are going to have to go to a financial institution or a mortgage broker. πŸ‘€πŸ‘¨β€πŸ’ΌπŸ’²

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When you go to a financial institution, they are going to give you the rates of that financial institution.Β 

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For example, when you go to a specific bank, the bank has its set rates. And those are the only rates that they are going to be able to give you on any mortgage. They might be able to give you a little bit of a percentage drop on the rates if you are a long-term customer. But the other thing is, if you are not a long-term customer, they might only be able to offer you a higher interest rate. So the terms will be based on their own products that the bank has to offer. πŸ¦πŸ’°πŸ“Šβ³

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When you are working with a mortgage broker, they will be able to go to several banks.Β 

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Most mortgage brokers have access to 10, 15, 20, 30 different lending institutions. What they will do is they will go out and they will look at your requirement. What are you buying? You are buying a fourplex in this area of town and you need financing. And so, what they do is they look at your credit rating and look at your credit score. And they see which banks will be able to provide you a mortgage and then they will go out and they will shop it around. It's like going shopping for anything, like shopping for a new car. But, instead of you going around from lot to lot, your mortgage broker will do that for you. πŸ‘¨β€πŸ’ΌπŸ‘€πŸ’πŸ‘Œ

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So, they will put in the application and they'll do that several times to several banks, and come back to you with what makes sense for you that’s the right fit. β³πŸ¦πŸ‘Œ

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The result is that you will get a better mortgage. And by a better mortgage, I mean better terms and better interest rates. Something that represents your needs better than if you went to a single financial institution’s mortgage officer or loan officer. πŸ‘πŸ‘¨β€πŸ’ΌπŸ‘ŒπŸ’²

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When working in real estate investing, make sure you are always working with a mortgage broker.Β 

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Even if you are looking at purchasing your own personal residence, I always recommend working with a mortgage broker. They are going to give you the most competitive price, the most competitive rates and the best deal that makes sense for you. πŸ‘€πŸ πŸ’°πŸ‘πŸ€

Episode #60 - Why Invest In Apartment Buildings

Episode #60 - Why Invest In Apartment Buildings

July 10, 2020

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The next property I want to talk about is investing in apartment buildings. πŸ’²πŸ¨

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The way you invest in apartment buildings is quite different than investing in residential properties.Β 

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Now, when I say apartment buildings, I usually mean buildings with 10, 20, or 30 units or more. The real definition, I guess, from an investment perspective, or from a mortgage perspective, is anything with 4 units or more is considered a commercial purchase. πŸ’²πŸ¨πŸ‘€

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The advantage of investing in apartment buildings is that you are not what that the bank looks at when you are trying to get a mortgage or when trying to qualify for a mortgage. What I mean by that is when you look for residential purchases, like single-family homes, or small multifamily homes, they look at your income, they look at your buying capability, etc.πŸ¨πŸ‘€πŸ πŸ‘¨β€πŸ‘©β€πŸ‘¦β€πŸ‘¦

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When you are investing in a building with 5 units or more, lenders are looking at the building's performance. That means they are looking at what are the rents? What are the expenses? What's the history of the performance of that building? This makes it easier to qualify, as long as you have the right amount of down payment. πŸ¨πŸ‘€πŸ‘¨β€πŸ’ΌπŸ‘ŒπŸ’°

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The other big advantage of investing in apartment buildings is the economy of scale. πŸ¨βš–οΈ

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What I mean by that is it is a lot easier to cash flow because of the number of units you have. It is also a lot easier to distribute the costs of maintaining the building. For example, in larger buildings, you could actually have a property manager on-site to manage the building.πŸ¨πŸ‘ŒπŸ’°πŸ‘¨β€πŸ’Ό

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The reason why most people shy away from apartment buildings is because of the bigger costs of owning an apartment building.πŸ‘¨β€πŸ’ΌπŸ¨β€΄οΈπŸ’²

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What I mean by that is, the costs of maintaining it, of keeping up the apartment building. For example, if you have to replace the roof on an apartment building, it's a lot more expensive than if you have to replace the roof on a single-family home. You also have a lot more tenants to deal with. You have a lot more rents to collect, which is a good thing, right. And that's the idea. That is why you get a property manager in place to do all that. πŸ’²πŸ¨πŸ πŸ‘¨β€πŸ‘©β€πŸ‘¦β€πŸ‘¦

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With a single-family home, if you had a property management in place, and you're only bringing in let's say $1,500 a month you would have to pay a property manager, let’s say, $100 a month. That's a much bigger percentage than if you had an apartment building and you had a property manager managing the entire property. πŸ¨πŸ πŸ‘¨β€πŸ‘©β€πŸ‘¦β€πŸ‘¦πŸ’°

Another thing is you could own the apartment building in a legal entity. So, if you sold you could sell the whole company.Β 

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There are a lot of advantages to owning apartment buildings. The disadvantage is when you go to sell it. It won't be as easy to sell as a residential property or as a single-family home is to sell. The sale of an apartment building takes a lot longer. πŸ¨πŸ’²πŸ‘¨β€πŸ‘©β€πŸ‘¦β€πŸ‘¦β³

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Okay. Those are the advantages and disadvantages of owning an apartment building.