How would you feel if I could distill the entire process involved in flipping commercial real estate on a MASSIVE SCALE into just four simple steps AND throw in there the key to surviving the NEXT REAL ESTATE CRASH IN STYLE? You’d be HUGELY excited! Good news. I’m Carole Ellis, and my guest, Sue Nelson, who has purchased thousands of apartments in her decade of commercial real estate investing, will break the entire process down for you today in Episode 21.
So let’s get right down to the four green flags you’re looking for when you’re thinking about investing in an apartment building. Now, for the sake of clarity, let’s take just a minute to define “apartment building.” If you listened to episode 20 (and if you haven’t, I HIGHLY recommend you do so immediately after you finish this one because my expert has a VERY UNIQUE way of looking at real estate deals that will truly revolutionize the process for you should you choose also to adopt it), then you know that Sue is not a big fan of the “small potatoes” apartment complex, say duplexes, triplexes, and quadplexes. So during this podcast, when we say “apartments” or “multifamily buildings” or “units,” just bear in mind, we’re talking BIG. And don’t let that intimidate you, because Sue is a true expert on the process of buying these things without using your own money and on flipping these things for fast, massive profits.
Now that we’ve got that out of the way, let’s get into the four things that Sue says you must do in order to know that an apartment deal is worth investing your time. If you’re just tuning in, our expert, Sue, is a long-time commercial real estate investing expert who has done it all and done it big for many years. She started out, however, as an art teacher, and only started flipping mega-properties when her daughter was born with some health issues. Sue tackled a 104-unit building as a “starter project” and literally made five times her teaching salary with one deal and never looked back. And speaking of not being intimidated, I can’t tell you how many times Sue said during the course of our exclusive interview with her, “If I can do it, anyone can!” And with these four “green flags” as a guideline, you’ll find it easy to believe her!
So, I asked Sue directly, “What are the things that you must check off on the list that would let you – or anyone doing this type of real estate – that they had a great deal.” Well, she’s a very methodical lady, and it turns out she has just such a checklist! And she agreed to share it here.
So, first of all, Sue checks cash flow. If the building doesn’t cash flow, then there is too much risk, she explained. That’s the first and biggest checkmark in the box.
Next, Sue evaluates the occupancy of the building. Occupancy is, as you might have guessed, the number of occupants in the building or, more specifically, the number of units that are occupied. “I usually only buy if the property is 85 percent or more occupied,” Sue told me, adding that in her opinion, numbers lower than 85 percent add too much risk to a deal and make it less attractive to investors and buyers.
Thirdly, Sue said, she evaluates the rehab costs on a building. Now, Sue gets a LOT of her properties from banks which is, much like the rest of commercial real estate, kind of an intimidating concept for a lot of people. However, Sue has certain MAGIC WORDS that she says to bankers that basically cause them to sit up, pay attention, and open up those REO (that’s real estate owned) books and start selling at a discount. If you want those words, by the way, as well as the ENTIRE, firsthand explanation from Sue about how to leverage these four green flags, head over to www.rei.today/IMPORTANT right now and register for Sue’s limited-time training. Returning to rehab, though, Sue looks for relatively low rehab costs so that she can add value to the property quickly not by fixing it up, but by, as she puts it, increasing income or decreasing expenses. And she’s not unclear: “I am not looking for large rehab deals,” she said on no uncertain terms.
Finally, Sue buys in what she calls “decent neighborhoods.” It is very, very difficult to fix a neighborhood, she warned me, adding that some areas – and you know what she’s talking about! – have a culture of non-repair that can really bog your projects down. “As much as you are dying to fix the world and help dilapidated areas, it’s very difficult to do that,” she said, pointing out it’s also very difficult to get other investors to invest in or buy those projects outright.
So there you have them, ladies and gentlemen. Four simple, straightforward green flags for buying BIG and doing BIG DEALS that should SELL FAST in commercial real estate, where six- and seven-digit deals are not at all uncommon. “When I have broken those rules, that’s when I’ve gotten in trouble,” Sue told me, and added that in her opinion, “If you follow those rules, you make it very, very possible that you are going to stay out of trouble regardless if we experience another 2008 market crash.” Given that she invested profitably and productively THROUGHOUT the crash, I’d listen to her on that one!
Now if you like what you’re hearing – and I know you do – in terms of clear, concise instructions for making big, BIG deals that probably seemed unimaginable for you before you started listening to this exclusive interview series with Sue happen in YOUR REAL ESTATE INVESTING BUSINESS, then you need to head over RIGHT NOW to www.rei.today/IMPORTANT to sign up for Sue’s extended, limited-time, FREE TRAINING. That’s www.rei.today/IMPORTANT. When you do that, you’ll be able to not only get Sue’s personal, extended teachings on just how to make this stuff work, but you’ll also be able to view real-life case studies about how she did it. So RUN, don’t walk over to www.rei.today/IMPORTANT and get on that class roster before we run out of room.
And once you’ve registered for the class, take a minute to review our other materials from Sue on the website at www.rei.today. You’ll see other podcasts, news and reporting on the topic, and far, far more insightful stuff that will make your real estate investing business safer, faster, and more profitable.
When you do that, you’ll also be able to GROW YOUR NETWORK by interacting with me and your fellow listeners to REI Today… so stop by to ask questions, make comments and network with other investors across the country in addition to having the chance to interact directly with Sue herself.
REI Nation, thanks for listening in. Now, more than ever, please remember this:
Your best investment is ALWAYS your own education.
Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.