Flip Tip Summary
Charles Dobens joins us for this FlipNerd Expert Tip to share some words of wisdom on how to look differently at Multi-family properties (apartments). It’s a great little analogy that will make you think twice! Check it out!
Flip Tip Transcript:
Mike: Hey, it’s Mike Hambright with FlipNerd.com and I have a quick Expert Tip to share with you from Charles Dobens, who’s going to share a tip on why multi-family real estate investing is not about owning properties.
This Expert Tip is sponsored by RealtyMogul.com, B2R Finance and AceBusinessFunding.com.
Charles: Thank you Michael. All right, so look at it this way, this is why I want to change your paradigm when it comes to multi-family investing, all right?
So many people think that owning apartments is all about owning real estate and it isn’t. Here’s why.
Let’s say, for example, you’ve got two apartment complexes right next door to each other. They’re both [inaudible 00:00:43] a piece, they’ve been built at the same time, have the exact same number of appliances, exact same number of bedrooms and they’re looking exactly the same.
One of them has 100% occupancy and the other one has 0% occupancy. Now, the real estate’s exactly the same, which one’s more valuable? Well, the answer everyone says is the one that has the 100% occupancy. Okay, but the real estate is the same, why is one more valuable than the other?
The other example I want to give you is, let’s say for instance you’ve got two properties, two factories right next door to each other. They’re identical in their footprint, they’ve got the exact same number of square footage on each side, the same number of offices, the same number of land. But, one produces buggy whips and the other one produces iPads, which business is more valuable? It’s the one that produces the iPads. The buggy whips, nobody wants them.
So you have to look at multi-family real estate as not about the real estate, the real estate is secondary. I want you to always look at the real estate as being, is nothing more than a factory that produces a product that you sell. And what is that product that you sell? It’s a contract. You are in the contract creation business when you own multi-family property.
You buy an A class property, you’re selling iPads. You buy a C class property, you’re selling buggy whips. The value of the product is what determines the value of the business. So that is the difference in multi-family investing. So don’t look at multi-family investing as having anything to do with the real estate. It’s all about the product that you’re selling.
Mike: We’d like to thank Colony American Finance, National Real Estate Insurance Group and virtualstaffnow.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.