I have lost count on the number of investors I have coached into their first or tenth apartment investment. But it has to be over a 1000 since I first started coaching in 2003. You’d be surprised how much I have learned from my students. It’s really true that what you teach you become very sharp at. Teaching and coaching apartment investing has really helped my own investing greatly. The marketplace has changed drastically since 2007, but coaching investors is still going strong. For this blog, I thought it would be helpful to share with you my observations from a coaches perspective of what today’s students are doing and are up against.
5 Observations I See Today As a Coach
Observation #1: From the 10,000 foot level, I see a lot of confusion and fear on both sides – sellers and buyers.
The questions I get from student investors often are, have we reached the bottom yet, what if I buy and the market further tanks, and what should I invest in – apts., retail, self-storage, mobile home parks, etc.
Sellers fall into two categories: ones that are doing okay and two, ones that are desperate to sell. The ones that are desperate to sell are being represented by brokers who have given up on them basically. These sellers need creative student investors to rescue them! Like you!
Observation #2: Banks and lending institutions are causing the most roadblocks to getting a deal done. Enough said on this point.
But honestly, the answer to this problem is: skip using the banks and use Master Leases or Land Contracts to buy apartments. As I mentioned in Observation #1, sellers are being abandoned by brokers, but sellers still want to or need to sell. And that’s where you come in. Go make those deals!
Observation #3: Prices of properties in some areas are down to 2002-2003 prices. I also see cap rates from 2004 levels in great cities to invest in.
Large office buildings here in SF are selling for 2003 prices per sqft. In Texas, areas that were 7 or 8 cap two years ago are now 9 and 10 caps. I expect cap rates to creep up even more. Take a look on the website www.loopnet.com and you’ll see what I’m talking about.
Observation #4: We need to think long-term now for wealth-building purposes. 7 year hold for cash flow strategy is a smart thing to do today.
Instead of buying and flipping apartments right away, you’ll need to hold onto it to maximize your profits. This is a change in our mindset, but how it was done in the old days (when things were stable). Face the fact that the economy and the way we do business has changed forever. Don’t give up, just make adjustments.
Observation #5: Students and people I meet at seminars need to be more aggressive in making offers to sellers. We are in a buyer’s market and we set the market price, not the seller or broker. The property is only worth as much as you are willing to pay for it.
BONUS Observation: Don’t give up! The roughness and toughness of today’s market is a “weeding out” process. This down market is a filter so to speak and is going to greatly reward those who stay in this game. It’s okay to sit on the bench to take a short breather, but don’t leave the game. Don’t give up.