I’ve been to battle lately and I’m frustrated as hell.  It seems like every deal I look at is dead before I even get started.  The problem is those darn cap rates!

Newbie agents spew their drivel about how a cap rate of 6% is standard for a C-class apartment building in the Atlanta market.  The stabilized rents will net a ‘nice’ return on the investment is what they try to tell me.

Here’s my problem with that.  First, I don’t know of a single lender in the world that would consider lending on an unstable complex with a ‘C’ rating and 6% cap rate on future rent.  The DSCR (debt service coverage ratio) is barely a break even when you consider current rent!  Give me a break.

When you are out there looking at deals and making offers remember that the profit is made at the purchase not at the sale.  If you buy into this non-sense and buy a property that is being capped at it’s ’stabilized’ rent you will end up on the loosing side of the deal! 

Just say NO!  There is a war going on right now and it’s being fought between those that know-better and those that know-nothing.  Don’t side with the later group, you’ll end up losing your pants!

All my offers are based on a 9-10% cap of the CURRENT rents!  The profit is created when I begin to update the property and raise rents to market levels.  Then maybe I can sell the place in a year or two with market rents as a stabilized property and charge the new buyer an 8% cap.

I lift the property from C to B and the buyer get’s a ‘coupon’ (a clean property that just needs good management and they just collect a check at the end of every month).  In the end I create a buyer for future properties that I purchase, rent up and stabilize. 

That’s how you win the apartment war!  Don’t get caught behind enemy lines by falling for the know-nothing’s propaganda.  If you want to know something about how to win and get financing for your apartment deals, give me a call.

Michael Gross is President of Dividend America Mortgage.  He has been a builder, an appraiser, a Realtor and is an active real estate investor.  He uses all of his knowledge and experience to help real estate investors create successful deals.  For financing questions or negotiation assistance contact him at 770-350-7373 or mgross@dividendamerica.com.

Are you old enough to remember the TV series Get Smart?  If not, then maybe you saw the recent remake in the theater.  Maxwell Smart was a bungling spy who always seemed to muddle his way through every episode.  His quirky nature and crack support team were his only weapons.

Every time he got into a tight spot, he would just plow forward.  Always confident in his ability and ever reliant on his faithful sidekick, 99.

When ever he would get out of a tight situation or come close to catching the bad guy he would say; ‘missed it by that much!’  Then he’d put is fingers just an inch apart to add emphasis to how close he was to success.

I loved that show and it reminds me a lot of the way I feel sometimes in the real estate business.  Sometimes I negotiate a deal and I just miss getting it.  But if the numbers aren’t right, I walk away.  I’m always mindful of the fact that you should never fall in love with the property, you should fall in love with the numbers.

If the numbers aren’t right, then walk away!  And sometimes for me, just as it was for Maxwell Smart, the bad guy will come back around!  I have to chuckle when I see a deal that I made an offer on 6 months ago come back around.

The bad guys pop up out of the wood work, but this time they want to play ball.  I put my crack team on it!  I send out my own special 99 to scout the deal all over again and see if the numbers are the same.

What I’m trying to say, is that it’s okay to miss out on some deals.  Many times being as patient as Maxwell Smart and having a crack team around you will make the difference in making a profitable deal and just missing getting taken by the bad guys!

I like old Maxwell.  He was confident and unafraid, but he was smart.  He had his team and plowed forward, but he also made sure to always come out on the safe end and he continually left the bad guys scratching their heads.

You to can be the Maxwell Smart of real estate.  Get out there and get started.  Find your 99, a team member that will watch your back.  You don’t have to be perfect, smooth or cool, you just have to get out there.  Then make some offers and be mindful that the sellers are the bad guys and it’s your job to make a bad situation good. 

Most importantly, if the numbers aren’t right, WALK AWAY!  Trust me, 6 months later the bad guys will come back looking for you and this time you might just be able to turn them to your way of thinking!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

You can dance alone and that’s fine.  Nobody gets in your way, no one stepping on your toes.  Dancing alone can be fun and you can do a lot of creative things. 

But dancing alone can also be tiring.  To make the dance look good you’ve got to be in constant movement.  The audience eyes are focused squarely on you and you must work the entire time.

However, dancing with a partner can be a lot of fun as well.  There are some pitfalls.  You have to watch out for someone stepping on your toes and you have to be sure not to step on theirs, but once you’ve mastered the routine the problems are solved.

One of the most magnificent dances you can perform requires a partner and it is the Tango.  

The reason the dance is so grand is because both partners have to work.  They both take responsibility for their part in the dance and if they are well rehearsed and practiced, the Tango is undeniably the most rewarding dance to watch and to perform!

So why the dance analogy on a blog about commercial real estate?  Simple, this post is all about Partnerships.  I wanted to veer away from talking about types of real estate and take a moment to explore business relationships.

Many people like to own real estate solely.  They don’t like the idea of a partnerships and they prefer to be the decision maker.  However, owning real estate in partnership with another can be a beautiful thing.  Once you learn the dance steps and establish the responsibilities of both participants, you’ll rarely step on each others toes.

When developing a partnership the first thing to remember is that it takes two to Tango!  Even though you set the rule and responsibilities of the parties, sometimes you have to cover for each other.  A good working relationship with a lot of give and take and some strong support are necessary for success.

I love to relate the story of when a good friend of mine and I went into business.  He was younger than I was and his father (a very successful business man) wanted to meet me.  We met and had a great conversation and then his father took us into his study and gave us some good advise. 

He said that a business partnership was kind of like a marriage.  He stated that it would take a lot of work to hold it together and that sometimes things would be great and other times things would be tough.  But, he said, if you both strive to do what is best for the ‘union’ (the partnership) then it will always work out for the benefit of the partners.

I agree completely with this comment.  There are many rules of thumbs that should be adhered to when developing partnerships and partnerships can be great in your business.  They can help you to leverage your time and assets.  And you can achieve greater wealth and expand your goals if you will remember one simple truism.

It takes two to Tango!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Warren Buffet is buying! The man who has been sitting on piles of cash for years is now in the game. This proves one thing, there’s blood in the streets and he’s making his move.

So what is he buying? He’s buying banks! That should be a signal to all of us that the time is right for us as well. This huge government bailout is associated with one thing, the credit crisis. That crisis has reached a fevered, political pitch and that means opportunity for those of us who choose not to panic.

There is a unique way to play this $700 billion banking bailout and we can emulate great investors like Buffet. We can BUY banks! There are many bank buildings that are empty and just sitting there waiting for creative investors to reposition them and turn them into something new.

With this crisis and the bailout, more banks are likely to come available. As industry giants alike Wachovia and Washington Mutual are snapped up for a song by Wells Fargo, Citigroup and Bank of America, more bank buildings will become vacant and put up for sale.

There are many ways to play the bank bailout. One is to put together a group of partners and go make low-ball offers on buildings that have been on the market for more than 6-months. Banks are strapped for cash and other than having to deal with a 10-year restriction that no other bank can occupy the space, these buildings can be bought for a fraction of their value in a normal market.

You could also invest in syndications. There are several real estate firms that are actively seeking investors to fund their purchases. The investment minimum is usually around $25,000 and offers an 8% annual return with a 10% bonus at the end of the third or fifth year. You can be a real estate investor without the hassle!

So once you’ve bought an empty bank building, what can you do with it? The ideas are endless. How about taking the drive through teller positions and turning them into a hand car wash and detailing center. The traditional wide open interior can easily be partitioned into office space and because of the vault and safety deposit boxes, some of that space can be turned into a mail-boxes-etcetera style shipping center.

As a matter of fact, Fed-Ex/Kinkos style businesses would do great in an old bank building or, how about a check cashing facility. The parking lots are usually huge and are large enough that the facility would make a great used car lot. I’ve even seen an old bank building turned into a restaurant where the vault was used as the wine cellar and private tasting room.

If done properly, playing the bank bailout could be quite lucrative. Whether you buy the bank yourself, create a partnership or invest in syndications, don’t miss this great opportunity. An old bank building could be your next Cash Flow Monster.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Residential, Residential, Residential! It’s all I hear form investors these days. Everybody sees the potential in residential right now because there are a lot of great deals out there. And to a certain extent, they are right.

However, I still don’t think people truly understand the investment. Residential real estate is an annuity. I say this because when you invest in a single family home, a duplex and in some cases even when you invest in a four unit residential building, you have to put a lot of capital into the investment in order to receive an immediate income.

Think about this, an annuity is an investment of a large amount of capital for a specified amount of time. When the time threshold is reached, the capital investment begins to throw off a decent amount of income. The time threshold can be shortened by increasing the capital investment. That’s how most single family residential investments work.

Now take a small commercial building. You make an initial capital input and that investment pays you immediately! It is a business and the lenders will not lend the money on the investment unless it can pay for itself in the form of current income.

Many people are afraid of investing in small commercial buildings because they say they don’t understand the nuances of dealing with the business to business relationship. Some real estate investors are just more comfortable being a residential landlord.

If you find you are one of those people. If you understand the renter and you pride yourself in providing a great place for people to live, then you can still upsize your investments by purchasing small apartment buildings.

The small apartment building gives you economies of scale. It helps to reduce the cost per unit for maintenance and repairs because the building houses more units. This type of investment also helps to flatten the loss curve by giving you multiple streams of income tied to a single property.

Adding a small apartment building of 8-24 units can really pump up your cash flow. They are easy to get into using multiple strategies and the great news is that lenders are willing to lend on them. Where you might be struggling to get money to buy those single family homes, money to purchase small apartment buildings is abundant.

The advantages from purchasing small commercial residential properties like apartment buildings are numerous. Lower maintenance costs per unit, higher overall cash flow per investment, more flexible financing and the ability to negotiate great deals.

The secret to purchasing these deals is no secret at all. If you’ve purchased single family homes and rehabbed them to hold as rental then you already understand what you need to do to get started with small apartment buildings.  Now all you need is the financing.

The financing can be arranged in many different ways. Down payments can be as low as 10% and in some cases you can structure deals with no money down. Remember that these are business deals and with the proper negotiation techniques there are many ways to bring a deal to the table.

The key is drop your fear of moving into larger properties and to understand the true money making potential of small apartment buildings. If cash flow is what you seek then investing in small apartment buildings can help you UPSIZE your residential real estate investing business and help you create a CASH FLOW MONSTER!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

There is an old saying that I learned from a teacher of economics and it goes like this; As America goes, so goes the world.  I think that it is poignant to point out that since the Credit Crisis started in January of 2007, the U.S. economy has been in a slide.  This downward spiral precipitated a weakening dollar, which in turn helped to hyper inflate the already increasing per barrel price of oil and the rising price other ‘dollar denominated’ commodities. 

As third world economies evolve into the next higher tier and as second world economies grow into the first tier, their appetite’s for fossil fuels and raw materials has grown.  Soon other countries and nation groups like the EU will be in direct competition with America for the title of the world’s largest consumer.  This rampant consumption of the world’s natural resources is causing a cycle of inflation that can no longer be constrained by the actions of our Federal Reserve Bank or the Central Banks of other nations.

So while the future of economics for the world is unpredictable, one factor continues to hold true.  The economies of the largest nations on this planet follow what happens in the U.S.A.  Just a little over 2 years ago, our economy hit its zenith.  We had a meteoric rise that started approximately 8 months after 9/11/2001 and we continued substantial economic growth for almost 6 years before the credit crunch brought us to a screeching halt.

Beginning in March of 2008 our economy was brought to it’s knees.  In 5 years from now, when all the data is in and analyzed, many economist believe that history will show that our economy has been in a full blown recession that may have started as early as January to March to of 2008.  They also believe that the catalyst to get the economy moving again may be the Federal Governments decision to take over the mortgage behemoths, Fannie Mae and Freddie Mac.

Today the EU reported that inflation is on the rise and that economic growth in the EU Zone is slowing.  The EU Central Bank believes that Germany, Spain and Great Britain are in or will experience a recession this year.  France and Italy will stagnate and inflation for the zone will remain at almost double the 2% target.

These reports are very timely and they follow a pattern that has been true for many, many years.  I take some comfort from all of this.  While it appears there is turmoil in the market place (and believe me, I agree that there is), there is also the return of some underlying fundamentals that is very promising.

While the stock marke  is still very volatile, the price of oil and other commodities is starting to drop. The bond market is starting to act in a more stable and normal fashion.  The spread between the yield on U.S. Treasury Bonds and Mortgage Backed Securities has started to narrow.  All of this bodes well for our economy and creating the stability that is necessary to bring us out of the current economic cycle.  The final sign of good news is a strengthening dollar.  Hallelujah!

So take a deep breath, start making your plans and get ready to go!  Because as our economy starts to claw it’s way back, there will be loads of opportunity for independent thinkers and entrepreneurial minded risk takers in the very near future.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please contact Mr. Gross on his direct line at 770-350-7373 or via email at mgross@dividendamerica.com

According to reports on Marketwatch.com, the Treas. Sec. said to congress; “If you have a bazooka in your pocket, and people know you have a bazooka, you may never have to take it out.”  Well he had to take it out and he used it.

There was an immediate reaction from world markets.  The effects of this action served to simultaneously strengthen the value of the dollar against other currencies, caused a lifting of most equities markets and gave many foreign investors and central banks confidence in the efforts to stabilize the American housing market.

So what does this mean for the real estate investor?  Well if you have watched the recent unemployment numbers, you have seen the unemployment rate jump to 6.1%.  This means a lot of professionals are out of work now but won’t be for long.

If you think they desire to go back into the corporate world, for the most part you would be wrong.  Many of the professionals that were laid off will take the opportunity to start their own companies and make their own way using their talents to create new businesses and new industries.

This is a great opportunity for those of us wishing to create Cash Flow Monsters.  As time wears on the economy will get stronger.  The dollar will strengthen and we will slowly lift out of the economic malaise caused by this recent downturn. 

Some experts have labeled our economic status as a recession and others argue that it is not an official recession.  What ever you call it is not important.  What is important is the fact that whenever the economy slows people get laid off.  When the economy starts to move again, many of these professionals choose to start their own companies and that presents opportunities for forward thinking real estate investors.

Think about it, these people will need warehouses, office space, retail locations, storefronts and the list goes on and on.  They will not have enough money to buy their own buildings so they will usually rent!  They will not rent the high-dollar, ‘A’ class buildings.  They will look for discounted space at the ‘B’ and ‘C’ quality buildings.

In other words, they will look to rent from the ugly little buildings with low rents. They will be renting from the properties I call the Cash Flow Monsters!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please contact Mr. Gross on his direct line at 770-350-7373 or via email at mgross@dividendamerica.com

Many real estate professionals that invest mostly in residential housing are reluctant to even attempt to enter the market for small commercial.  This is because they have a perception that it is very expensive to get into commercial properties.

Well, that may not be exactly true.  It actually costs about the same in terms of percentages to get into commercial as it does residential.  Think about it this way.  If you have 10 loans at $100,000 you have a million dollars in loans.  If you paid 3% to close each transaction you’ve actually paid $30,000 in fees, about the same amount you would pay to close one $1,000,000 loan.

Others decry the ‘large’ down payment required to acquire small commercial property.  But now, the out-of-pocket cost is less to get into small commercial than in most residential transactions.  This is because of the flexibility of small commercial lending.

There are lenders that will allow investors to cross-collateralize loans.  This feels like 100% financing to the investor.  Cross-collateralizing works in a combination of ways.  In most cases the lender will put a loan on equity in other property to use as a down payment on the property being purchased.  In some instances real estate with equity acts as additional security in the loan along with the property being purchased and all the properties are secured under the same ‘blanket’ loan.

These strategies along with more advanced lines of credit, like the ones that are available for loans against stock and mutual fund portfolios, can be used to provide real estate investors with financing for new projects without having to liquidate cash assets.  With small commercial real estate investors can have a 100% financing experience.  That is something that is not currently available for single family residential real estate investments.