Making a Fortune with Apartments - Scott Scheel

90 Pages·2012·1.92 MB·English

Make a Fortune
Investing in Apartments

The easy, proven system for buying apartment buildings for big
profits – with no money, no credit and no experience

Scott Scheel

The Commercial Property Academy
MakingMoneyWithCommercial.com
1-888.807.9964
Testimonials
Scott,

With your coaching, on my first commercial deal I was able to get the property without a penny
out of my pocket. The seller was willing to do owner financing for a year with a purchase price
of $170K.

The rents for the property total $2,250 a month with the tenants paying all utilities except
sewer. The cash flow will conservatively be $1,000 per month. I thought this was a pretty good
start into the commercial world :-). Thanks again for everything!

Steve Kansa
Atlanta, GA
I have only been in this country for seven years, and have never invested in real estate before.
The day after I came back from Scott's event in Ft. Lauderdale, I quit my job and found a 29-
unit property for $525,000 with enough cash flow to replace my income. I bought it ‘no
money down' the way Scott taught me.

After one year, the property will be worth over $1 Million. I will be able to pull out over
$200,000, still own the property, and it will still cash flow over $50,000 per year. I am so
thankful.

Mila Mazancova
Charlotte, NC
After listening to Scott speak, (and being in the middle of negotiating a deal), we couldn't resist
hitting Scott up for some advice. Friend, I can tell you it takes a lot to impress me! In 30
seconds, Scott gave us advice that made us $20,000 on this deal!!! The units will rent for $430
per month. My wife can now quit her job. Yes, I am impressed!

J. B. McConnaughey
Kannapolis, NC
The deal analysis section gets FIVE STARS! The information far exceeded what I expected. I
really appreciate the Opportunity Evaluator™ software -- now I can finally evaluate my
current and future deals. Thank you so much!!!

Booker T. Perry
Maitland, FL

Great course. We feel empowered enough now to make creative offers based on truly
evaluated numbers, not just guessing. Thank you.

Rick and Kimberly Gossett
Waco, TX
Scott,

Before I attended your academy, I was strictly focused on single family and small multi-family
housing (2-4 units) and doing OK for myself. I was caught up in the flip mentality... we sold
everything and held nothing. I got good at creating lump sums of cash, but the challenge was
that if I didn't have a deal closing each month or so, I was struggling to cover overhead.

I heard about you and your Creative Commercial Real Estate Academy. I didn't hesitate to sign
up. What I learned has truly changed my life forever! Within 6 months of attending your class,
I find myself closing on a 99-unit apartment complex here in New Orleans and close to closing
on a 10-story office building downtown. These 2 deals together will yield almost 3 million
dollars in equity and a passive income of around $30,000 per month. Without the knowledge I
gained at your seminar I wouldn't have had the slightest clue as to how to make these deals
work. Your course taught me everything I needed to make this dream come true. And it IS like a
dream. I feel like I am holding a winning lottery ticket!

Warmly,

Chris Daigle
New Orleans, LA
About the Author

J. Scott Scheel

Scott Scheel is the nation’s leading authority on creative commercial real estate investment. His
unique strategies for investing in apartments, office buildings and retail shopping centers of any
size have changed the world of successful real estate investing forever.
Scott is a self-educated entrepreneur and multimillionaire. He has also been recognized twice
by the Wall Street Journal as Congressional Businessman of the Year.
Scott has created an amazing commercial real estate empire with no formal education or
previous experience. In the last 15 years, he has bought or partnered on commercial properties
worth more than $1 million.
Since the founding of the Commercial Property Academy, Scott has personally trained more
than 100,000 investors from 27 countries on six continents. He has trained investors alongside
notable financiers such as Donald Trump, Robert Kiyosaki, Alan Greenspan, Rudy Giuliani,
Richard Branson, Tony Robbins and former vice president Al Gore.
Scott will teach you how to take your investment career to the next level. He will guide you, as
you foray into the extremely profitable world of commercial real estate. Scott provides in-depth
training that covers all major types of commercial properties, including apartments, retail,
office and raw land.
Table of Contents

Testimonials ................................................................................................................................................ 2
About the Author ........................................................................................................................................ 3
Table of Contents ........................................................................................................................................ 4
Chapter 1 - Why Apartments & Types of Apartments ................................................................................ 7
Part 1 - Why Apartments & Why Now .................................................................................................... 7
Part 2 - Why Apartments Make Strong Investments............................................................................... 7
Part 3 - The Time is Perfect ..................................................................................................................... 8
Part 4 - The Monopoly Principle ............................................................................................................. 9
Part 5 - Four Personal Investment Stages ............................................................................................... 9
Part 6 - Setting Goals for Yourself ......................................................................................................... 10
Part 7 - Types of Apartment Buildings .................................................................................................. 11
Part 8 - Understanding Property Classifications .................................................................................... 12
Part 9 - A basic overview of the Entire Apartment Buying Process ....................................................... 15
Student Testimonial - Peter Zebka Las Vegas, NV ................................................................................. 16
Chapter 2 - Finding Apartment Deals ........................................................................................................ 16
Part 1 - Bank Workout Departments ..................................................................................................... 16
Scripts and Role-Playing at Live Events ............................................................................................. 17
Part 2 - Auction Houses ......................................................................................................................... 17
List of Auction Houses at Live Events ................................................................................................ 20
Part 3 - Letter Campaigns ...................................................................................................................... 20
Letter Campaings at Live Events ....................................................................................................... 21
Part 4 - New Commercial Real Estate Agents ........................................................................................ 21
Scripts and Role-Playing at Live Events ............................................................................................. 24
Part 5 - Loopnet.com ............................................................................................................................ 24
Part 6 - Other Ways to Locate Deals ..................................................................................................... 24
Student Testimonial - Steve Lazarus, Washington, DC .......................................................................... 25
Chapter 3 - Evaluating Apartment Deals ................................................................................................... 26
Part 1 - Check and Verify the Numbers ................................................................................................. 26
Part 2 - 7-Move Quick Check ................................................................................................................. 27
Part 3 - How to Calculate the Cap Rate Example................................................................................... 27
Part 4 - Cap Rate Modifiers ................................................................................................................... 27
Part 5 - Debt Coverage Ratio ................................................................................................................. 28
Part 6 - Using Software to Help You Evaluate Deals .............................................................................. 29
Part 7 - Crucial Questions to Consider During Your Evaluation ............................................................. 31
Student Testimonial - Renee Miller, Seville, OH.................................................................................... 32
Chapter 4 - Funding .................................................................................................................................. 32
Part 1 - Traditional Banks ...................................................................................................................... 32
Part 2 - Seller Financing ........................................................................................................................ 34
Part 3 - Partners .................................................................................................................................... 34
Part 4 - Hard Money.............................................................................................................................. 35
Part 5 - Private Money .......................................................................................................................... 35
Part 6 - City, State, and Federal Grants ................................................................................................. 37
Student Testimonial - Tommy Sirianni and Mark Arnella, Massapequa, New
York..……………………………………..38
City, State, and Federal Grant Programs at Live Events .................................................................. 409
"How to Talk to Lenders" at Live Events ............................................. Error! Bookmark not defined.9
Chapter 5 - Developing Your Exit Strategy ................................................................................................ 39
Part 1 - Quick Turn .............................................................................................................................. 419
Part 2 - Reposition ................................................................................................................................ 40
Part 3 - Keep the Property .................................................................................................................... 41
Part 4 - Keep the Property and Then Refinance It ................................................................................. 41
Part 5 - Exchange and Refinance the Property ...................................................................................... 42
Part 6 - Sell the Property ....................................................................................................................... 44
Student Testimonial - Timothy Owens, Dana Point, CA ........................................................................ 44
Chapter 6 - Presenting Your Offer ............................................................................................................. 45
Part 1 - Construct & Present Offers....................................................................................................... 45
Part 2 - Creating a Letter of Intent ........................................................................................................ 46
Part 3 - Example Letter of Intent ........................................................................................................... 47
Part 4 - Sample Contract Contingencies ................................................................................................ 49
Part 5 - The Contract ............................................................................................................................. 55
Student Testimonial - Jillian Herfurth, Cambridge, ON ......................................................................... 71
Contract Case Studies ........................................................................................................................... 72
Chapter 7 - Closing on Deals and Increasing the Value ............................................................................. 72
Part 1 - Closing on the Deal ................................................................................................................... 72
Part 2 - Increasing the Value ................................................................................................................. 73
Student Testimonial - Roger Ketchum, Kilgore, TX................................................................................ 74
Chapter 8 - Managing the Property .......................................................................................................... 75
Part 1 - Deciding Your Management Structure ..................................................................................... 76
Part 2 - Should You Self-Manage ........................................................................................................... 77
Part 3 - Five Factors for Choosing the Right Property Management Company ..................................... 77
Coaching Opportunities ........................................................................................................................ 78
Testimonials .............................................................................................................................................. 78

Chapter 1
Why Apartments & Types of Apartments

Part 1 - Why Apartments & Why Now

Let me start from the beginning. In 2000, I was totally broke.
A business I was involved in had failed, so I found myself out of a job. I had over $400,000 in
debt and lived in a 450 square-foot apartment. I had hit rock bottom. The only bright side was
that there was nowhere to go but up.
I decided to learn about real estate, since the real estate industry has created more millionaires
in this country than any other area of business.
I sought out people who REALLY rake in the big bucks and found that the truly wealthy
investors own APARTMENT BUILDINGS, not single family homes. I realized that it is these
people who own large apartment buildings that live the lifestyle I wanted.
Also, the wealthy commercial real estate investors do not waste their time tending to their
properties. Instead, they have property managers who take care of that for them. However,
they are the ones who spend the big checks, travel to exotic destinations, and live the lifestyle
that I desired.
So I decided to buy a 24-unit apartment building as my very first investment property. I bought
the building with “no money down” and even got a check for almost $50,000 CASH BACK at
closing.
A little over ten years ago, I knew NOTHING about apartment buildings. In fact, I overpaid for
my first investment property. The seller was asking for $900,000, and I agreed to pay $918,000
because I was too eager to buy. I made a lot of mistakes.
Realizing my mistake, I invested heavily in real estate education during the next three years.
Because of what I learned in those three years, by the time I finally sold that first building, I had
made over $1,620,000 in total profits from that ONE apartment building investment. That first
deal changed my life forever, and I never looked back. I have never done a smaller deal since.

Part 2 - Why Apartments Make Strong Investments

Apartments make strong investments for several reasons. The main reasons are:
 Similar to Single-Family Houses - Apartments are closely related to single-family
residential investments. Therefore, residential investors who are looking to move into the
commercial marketplace will easily understand apartment investments.
 Economies of Scale - Apartments allow you to develop wealth at a faster pace than most
investments because of their economies of scale. This is because small rental increases are
multiplied by the number of units in each property.
 Many Tenants - Your risk is substantially reduced because there are many tenants paying
your mortgage instead of one.
 Commodity - Finally, and most importantly, apartments are the only sector of commercial
real estate that is truly a commodity, fulfilling a basic human need (shelter). When couple
that with the basic principle of value based on the cash flow that a property generates,
you realize that apartment investments truly share the best of both worlds. In other
words, it’s a commodity that gives you cash flow.

Part 3 - The Time Is Perfect

Because of the state of the national and global economy, now is the perfect time to invest in
multi-family properties. In the current economy, houses stay on the market for months on end
as a result of the housing bust; retail properties are lagging because of decreased consumer
spending; and office properties are weak because of cuts in the workforce. However,
apartments are stronger than ever!
In fact, the market is seeing a boom in the demand for apartment units, and it's not even close
to the peak! Literally hundreds of thousands, if not millions, of people who would have been
able to purchase a home just 12 months ago, but are now forced to rent. This is because there
are no loans available after the sub-prime meltdown, especially for those on the economic
border of buying versus renting.
Also, the market has created huge opportunities to acquire apartment buildings - way, way,
way below retail value. The market is bursting with great properties, in great areas, with great
tenants looking to rent. Many tenants find themselves without a home, since being dumped
by owners who bought during the real estate craze of 2003 to 2007 and now find themselves
unable to make their mortgage payments. Even banks are having to clear out tenants in the
dozens or more foreclosed properties on their books and sell these properties for under market
value. These properties are simply sitting there, waiting for an investor with the right education
and skills to come along and make a fortune off of them!
This means that even during a recession, there is more demand for apartment units. Plus,
finding quality tenants may be easier than ever. Not to mention that there are more great
properties available than ever before! Now is the time to become filthy-rich by investing in

apartments!
Part 4 - The Monopoly Principle

In the last decade or more that I have been teaching multi-family investing, I have developed a
technique that I call the Monopoly Principle.
I'm sure that Monopoly® is a game that you've played many times before. Have you ever won
the game by only buying houses?
Of course not. That's not a winning strategy. So what do you do to win in Monopoly? After
you've bought four houses you exchange them for a single larger property, right? That's when
the income really starts flowing in. It works the exact same way in the real world, too!
If you've been investing in single-family homes, the last 18 months probably haven't been too
kind to you, correct? Now I'm not saying that buying single-family properties is a bad
investment, I'm only saying that Multi-Family properties are a much better investment! It's
time for you to trade in those houses and start making real money!

Part 5 - Four Personal Investment Stages

As we grow in life, most people go through four stages of investment. Where do you stand?
Knowing this will help you determine your goals for investment.
 Asset Accumulation: This normally takes place in your early to mid 20’s and continues
through your early to mid 30’s. During this time, you’re laying the foundation of acquiring
the basic necessities of food, clothing, transportation and shelter. Also during this time
frame, most people begin to save and initially become aware of the importance of
investments.
 Wealth Creation: Occurs from your mid 30’s to mid 50’s. This is when the majority of
people really start to take a more aggressive investment posture. They recognize that they
were saving too little while actively working within their career.