215: How to Make Big Money in Small Apartments

SHOW NOTES FOR EPISODE 215: HOW TO MAKE BIG MONEY IN SMALL APARTMENTS

Lance Edwards was stuck in a 60-hour-a-week dead-end corporate job and still couldn’t make ends meet.  As he sought other ways to generate additional income on the side, he stumbled upon real estate investing.  Within three years, he was able to quit his corporate job and hasn’t looked back since.  In this episode, Lance shares his secrets for success and why he believes small apartments, hands down, are the best way to generate immediate cash flow to replace your income and achieve wealth today.

What You Will Learn

• How to replace your current job income in three years or less.
• Why multifamily investing provides bigger numbers in a shorter time period.
• How to start apartment investing using none of your own cash or credit
• Why using other people’s money (OPM) in apartment investing is easier than you thought
• How you can flip apartments (without even seeing the apartments) to create piles of cash now
• How to overcome your fear of getting started in apartment investing
• Lance’s three inside secrets for creating steady and consistent deal flow
• A little-known website where you can find below market apartment deals with owner financing

About Our Guest

Lance Edwards

Lance Edwards is the author of the best-selling book, “How to Make Big Money in Small Apartments.”  Which also happens to be the Old Dawg’s REI Network Top 20 recommended real estate investing books every investor should own.  His company, First Cornerstone Group, LLC is a real estate education and marketing company which enables both new and experienced real estate investors to accelerate their path to financial independence thru small apartment investing, using other people’s money.  The Houston Business Journal recognized Lance’s company as the 13th fastest growing private company in Houston, Texas.

Since 2007, he’s also taught and mentored thousands of investors nationwide on how to get started in small apartment investing (2-30 units), using none of their own cash or credit and with no prior experience.  Lance teaches investors to “start small and then scale up to mid-size and large apartments.”  Whether wholesaling or buying, his student success stories are those of everyday people, mostly beginners, who’s very first real estate deal was a small apartment building.

How Lance Got Involved in Real Estate Investing

• Around 2001 and 2002, Lance was working 60 hours a week in a full-time corporate job and was looking for another source of income for his young family.
• Lance and his family were on a summer vacation in Hawaii.  They were walking down to the beach and he saw a bookstore and thought it would be great to pick-up a book to read while sitting on the beach.  He found this book called “Multiple Streams of Income” by Robert Allen that started him thinking about real estate.
• This inspired him to later take a course in real estate investing entitled “How to Buy Houses for Nothing Down?”
• His instructor told him to better meet your financial goals, you need to shift from single family to multifamily. Multifamily provides bigger numbers in a shorter time period.
• He started looking in small apartments
• His very first deal was a fourplex that he bought for nothing down – with a 100% seller-financing.
• A person’s first deal is the most critical and usually the scariest one.  This is stuff that you are never taught in school.  This also became important for him in as a launching pad for his real estate business.
• Over the next 2 ½ years, on a part-time basis, he bought more than 50 “nothing down” real estate deals.
• He bought fourplexes, 10-units, 50-units to 85-unit projects, always using other people’s money (OPM), because this is how he was taught.
• Within 3 years of part-time investing in small apartments, in 2005, Lance was able to retire from his 20-year career corporate job to do real estate investing on a full-time basis.
• Shortly after that, he was approached by colleagues in a real estate club in Houston, where he lives, to teach them how he does apartment deals using none of his own cash nor none of his own credit.
• He conducted his very first seminar in July 2007, which launched the training side of the business.

Why he Prefers Apartments to Single Family Homes

• It’s all about the economies of scale.
• Apartments are designed as “cash flow instruments.”
  • Small apartments have one roof, shared roof, shared walls, one foundation.
  • Dollars per door are better than single family homes.
• Houses are designed to be bought by home owners.
• Would you rather buy a six-unit apartment building or buy six houses?

Overcoming the Fear to Get Started

• What holds us back to do our first deal is fear – fear of making a mistake.
• For Lance, it was the fear of embarrassment – getting on the phone with a seller, realizing that he doesn’t really know what he is doing, and not being able to answer the sellers questions. What if they asked him a question he couldn’t answer?
• It took him a year before he finally got the courage
• Lance realized and teaches people today, that this is all just junk in our head and you just need to overcome that and take that next step.
• He went into more trainings and seminars, bought more home study courses — stacked up to the ceiling – all to try to compensate for the fear sitting in his mind.
• His mind shifted when he first talked to his first seller. He came to realize that they are normal everyday people, just like you and I, who are trying to figure out that they want to sell their property and if you want to buy it.
• For anyone getting started, it is again a mindset, you don’t need all the answers to get started. You just need the confidence and you can figure it out along the way.  Whatever resource that he will need along the way, he will be able to acquire it.
• We have the responsibility and the opportunity to create whatever we want to create, as long as we have the vision and the clarity of the vision, we can attract all the resources we need.
• For Lance, real estate investing is a journey, and it is growing and learning.
• After a year of putting it off, Lance did his first direct mail marketing campaign – with knees shaking, as he stood over the mail box, and knowing that if he mails the letters, people will be calling him, Lance sent out 50 letters.
• He ended up getting a 30% response to his direct mail effort.  From the 15 people who responded to the campaign, he ended up buying  23 properties — all with owner financing.

About His Business

• Lance’s business is known in two areas, which are also his passions
  • Training or empowering people, especially Old Dawgs, on how to change their financial trajectory in a very short period of time through small apartments
  • Transaction or deal-making or doing apartment deals all over the country
• His company, First Cornerstone Group, LLC is a real estate education and marketing company which enables both new and experienced real estate investors to accelerate their path to financial independence thru small apartment investing, using other people’s money.
• Houston Business Journal recognized Lance’s company as the 13th fastest growing private company in Houston, Texas.
• Since 2007, he also taught and mentored thousands of investors nationwide on how to get started in small apartment investing (2-30 units), using none of their own cash or credit and with no prior experience.
• Lance teaches investors to start small and then scale up to mid-size and large apartments.
• Whether wholesaling or buying, his student success stories are those of everyday people, mostly beginners, who’s very first real estate deal was a small apartment building.

 Biggest Mistakes

• Lance believes that everything happens for a reason and it serves us well.  This belief system and mindset has served Lance well, over the years.
• When things don’t go the way you want it, it is painful.  But if you adapt to the belief system, then everything happens for a reason, and that reason will serve you, and you can search for ways that the experience will benefit you.
• Undoubtedly and eventually, it finds a way to serve you. No matter how painful it was at that moment.
• He went into a partnership which did not worked and he described it as a bad marriage.
• This experience was way back, early on, when he was brand new and felt he needed somebody to take him under his wings.
• It was a very painful experience and an expensive lesson.  But with the mindset that all things happen for a reason, this experience can benefit you.
• He learned that he doesn’t need a partner.  This experience benefited him because it taught him to rely on his own instinct, his own thought processes, and his own decision.

Biggest Success

• He looks at things like:
  • His company being recognized by Houston Business Journal as the fastest growing private company in the City of Houston, Texas.
  • His company was also recognized by Inc. Magazine for multiple years as the fastest growing private company in the nation.
• But one, a “home run” transaction stands out – It was the largest transaction he had ever done.  He wholesaled, flipped an $11 million apartment complex in Houston, Texas.

Flipping Apartments – A Unique Strategy to Create a Deal Flow

• You can flip an apartment complex as well as you can flip single family houses.
• His definition of flipping in apartment is defined as:
  • It’s not like a SFR flip where you buy a discounted house, fix it up, sell it at market and reap a quick profit.
  • With apartment flipping, you have to get the seller to sign a “Contract to Purchase” (it says “your name” or “The assigned”) – this give you the right to sell the property, even though you don’t own the property.
  • You “flip the paper.”
  • You never put up money in the transaction.
  • You don’t even have to see the building.
  • You never have title to the property.
  • You flip the Contract to Purchase to the end buyer.
• He put a contract to buy a 4-plex in place, wherein the buyer in the contract should say come up or assigns –which gives the him, the buyer, the right to assign his contract to end buyer whose going to pay him for that contract.
• The process of flipping an apartment is very similar to wholesaling houses, with one distinctive advantage – you don’t need to see the building.
• He flips apartments all over the country, sight unseen, with buyers sight unseen.
• He flipped 2 duplexes in Indiana that he put into contract, sight unseen, to a buyer at Switzerland.

How do You Replace Your Job Income?

• Strategy to replace job income – “flip one, flip one, flip one, hold one and repeat”
• You can replace job income in a matter of months by flipping
• Flip the ones you don’t want to hold on to ($10,000 to $50,000 per flip on small apartment flips)
• In a matter of 3 years, you can have enough doors, cash and cash flow to retire.
• This means that as you creating deal flow, apartments deals coming across your desk, where you will flip the ones that you don’t want to hang on to for some reason and along the way, you cherry pick the properties that you want to hang on to for passive income –mailbox money.  You accumulate enough doors until your mailbox money produces enough income that you don’t need to do flipping anymore.

Advice to Old Dawgs Interested in Getting Started in Real Estate Investing

• “Flip one, flip one, flip one, hold one”.
• Flipping generates tons of cash to pay today’s bills or pay down debts, or to accumulate a nest egg.
• To get started in this business or in any other business, you got to get your marketing started, you got to get the phone ringing to get deal flow.
• Three marketing methods to create deal flow:
  • Websites – LoopNet, MLS (great source for small apartments most apartment hunters don’t know about)
  • Brokers – develop relationships with brokers who will feed you their “pocket listing” (off-market deals not listed publicly) that the broker usually saves for those they have a good relationship with.
  • Direct Mail – is what Lance considers as his secret weapons.
    • Puts you in direct contact with the owner of an apartment building (95% of the time that property is not yet listed)
    • In a position to negotiate seller financing without banks.
    • Has a direct contact with owner and you have the position to negotiate seller financing which means buying the property without any bank qualifications, and can negotiate own down payment, interest rate, and terms.
    • No competition.
    • He primarily does postcards (black font on canary yellow) which has a higher probability to not be thrown in the trash can, as opposed to many direct mail letters.  The postcard has the message right there as opposed to letters  that you need to open the envelope before you can read the message.

His “Done For You” Services

• His training business has evolved, primarily, in assisting people to run their own businesses.
• “Done for You” services just to queue up the absolute the most qualified best deal for clients that their work with
• Direct mail – send out postcards
• Qualify leads that are coming in
• He has a website where affordable small apartments are listed. www.SmallApartmentDeals.com
• In many cases, Lance’s employees have already negotiated a good price and, many times, with seller financing built-in.
• Properties are sold right on the website (you get assigned the contract).
• A “one stop shop” for apartment investors.

 Where He Sees His Business in the Future

• Main focus right now is automating the business and allowing the outsource.
• This means providing the services that he can provide to his clients so he can generate a high volume of deal flow with minimal effort on behalf of his clients.
• He wants to systematize and automate his business to enable clients, on a part-time basis, to quickly replace their job income.

Rap-It-Up

• Favorite Real Estate book: Any books written by Ron LeGrand
• Favorite business book: Scaling Up by Verne Harnish
• Most valuable web site for success (other than your own):  Nightingale-Conant – resources on career, relationships, personal wealth, and self-confidence
• Favorite app: Evernote
• Favorite quote: “If your phone’s not ringing, you don’t have a business, you have a hobby ”
• If you had to start all over, knowing what you know, and you only had $1,000 cash, what would you do to launch your real estate investing business?  Start wholesaling, flipping small apartments, and hold the good properties and repeat.  The same thing as how he get started.

Free Book and Other Great Stuff For Old Dawgs From Lance

• Get Lances Book FREE and a CD that compares apartment investing to single family home investing. Just click here!
• Attend a free “How to Replace Your Job Income with Small Apartments” webinar and learn:
  • Why small apartments are designed to create cash flow for you
  • How to generate cash flow using your money, or OPM
  • How to do it all part-time using your phone & Internet
  • How to leverage your cash by using creative financing
  • How to regularly earn double-digit returns
  • You’ll also get free, the following items:
    • List of Websites to Find Apartment Deals
    • Apartment Analysis Software
    • Apartment Analysis Manual
    • Scripts for Speaking with Brokers & Sellers
    • Property Manager Interview Questions
    • Deal Underwriting Guidelines
  • To schedule time on the online webinar, click here!

How to Reach Lance

• LanceEdwards.com
• FreeApartmentsBook.com
• Phone 713-476-0102

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