Apartments offer something that is way much juicier and way more fun. It’s called “cash flow” which is actually pretty cool.

Buying an apartment complex in one spot or market is not only very easy but it also has certain benefits. One example is when you buy an apartment complex with 100 units. Compared to buying 100 single family homes, buying a 100-unit apartment complex provides a central location where you can have everything such as 100 different yards to mow and tenants in a single spot.

There are a lot of things going on when you think about buying apartments. While it is not a difficult thing to do, it is something that is deemed as different.

As a way to gain a better understanding of how apartments can be different, let me explain by revealing the first among the six pillars for successful cash flow in apartments.

Discovering The Secret Language Of Apartments

There are really six secret pillars for successful cash flow in apartments. The first one is “discovering the secret language of apartments.”

“It doesn’t matter where you start. It is how you play the game and where you finish.” Corey Peterson

Do you know that you can have success even if you’re starting from nothing? You don’t have to be born in the money. Even the greatest investors don’t come from that level. Maybe it happens to some with the exception of Donald Trump. However, Donald Trump himself borrowed a couple of million and then turned the million into billions.

So you see, it’s really not about where and how you start. It’s all about how you play the game, how you finish and what you are doing to set yourself up for retirement, for cash flow, to living the life that you’ve always wanted to have. This is what success is all about.

“Success is sunsets and palm trees and living the life that you dream of.” Corey Peterson

Learn How To Sprint

In this business, you have to learn how to sprint and then learn how to marathon. Sprinting is when you have to put in the work. An example is listening to a podcast to try and get your mind right. Sometimes, you need to spend a little bit of time sprinting such as taking on the information and getting such information all gathered in and processed.

Learn How To Marathon

Once you have a good understanding on how to sprint, you can start learning how to marathon. You can’t sprint forever. It’s not a good way to do business. It will make you burn out.

In this business, there are times when we get a property under contract. Then, we would be sprinting for a period of around three months. During this period, we would be really focused on what’s going on. Afterwards, we would shift and get to marathon. This is the period when we only do the little things and make these little things successful.

The A,B,C’s Of Buildings

When we’re buying apartments, you should know that apartments are also graded. You have the so-called A properties, B properties, C properties, and D properties which is also called the warzone.

An A property refers to the new properties that you see being constructed. These are very high end properties where rents are very expensive. They’re most probably built last 16 years or so and have all the amenities which is really what you’re solely paying for. However, most investors would choose not to touch this type of apartments because they offer very low rate of returns.

The B properties are usually built somewhere in the 80’s and 90’s. These are really nice looking properties even though they’re a little bit older and don’t have all the amenities. B properties are actually great because they don’t have deferred maintenance. This refers to when a property owner or a property management company is not taking care of problems that happen on the property.

C properties are built between the late 60’s and the 70’s. Typically speaking, C properties don’t have a washer and dryer hook-up inside the unit itself. Usually, you would find a laundry facility which is also a great place to make some income.

D properties or the warzone refers to those places where you wouldn’t want to go to at all at night. These are places that are simply riddled with crime. Honestly speaking, these are areas that you just want to stay away from.

Buying B And C Properties

A lot of people buy B and C properties but end up running them improperly as well as mismanaging them. Things go wrong which means that there are always opportunities for experienced operators.

What you need to do is to find B and C properties, B and C buildings. They don’t build these things anymore. Sometimes, these areas, the B and C, can change because what happens in this stuff is that the path of progress can change and move. Some of these areas got way more excited and moved up. Incentives are usually offered to improve the area.

If you could buy a C property in a B area, that’s great. The same thing goes with buying a B property in a B area. The opposite ones just make sense but you can buy a B property in a C area. This area should be seen as something that is improving. It is not going down like going from C to D. Hopefully it is improving such as becoming C to a B.

Emerging Markets And Market Cycles

When we talk about emerging markets, we are actually talking about growth. Emerging markets are those markets that have lots of potential.

In market cycles, every different city is sometimes somewhat in a different market cycle. If we’re doing these apartment deals and we’re going to talk about how we want to buy them and hold them, you can buy this thing and hold them forever. But if you want to sell them, you want to sell them when you’re at the peak, the top of the market.

Cap Rate

Cap rate or capitalization rate is used to estimate the investor’s potential return on his or her investment. It equals your net operating income or the income the property makes divided by the current market value.

Cap rates are what really set the market for a particular stream of income. When you’re buying a property, you want to buy at a high cap rate, the highest cap rates that you can possibly buy it. If you could find properties with a trending cap rate of 8 percent and then buy them at a cap rate of 10 percent, you are getting a good deal.

Look for deals that you can buy at a good cap rate or good return. Make improvements on the property to be able to make a lot more money and make value in the deal. It’s not that hard but it does take some time and it takes a little bit of education.