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#71 Top 10 Apartment Investing Terms Every Beginner Must Know (2026) · Own More Doors

0:00
SPEAKER_00: If you're new to multifamily or apartment building ownership, I want you to tune in because here are the top 10 terms that you need to get familiar with.
0:06
SPEAKER_00: Hi, I'm Juan Weezar.
0:08
SPEAKER_00: Hey, I'm Jack Patel, and we're going to dive right in.
0:10
SPEAKER_00: All right, Jack.
0:11
SPEAKER_00: So here are the 10 terms that get thrown around a lot when you're looking at an apartment building.
0:17
SPEAKER_00: Um, I will tell you this: if you're looking at a small apartment building, some of these terms may not be used as much, but they could still be relevant.
0:23
SPEAKER_00: Okay.
0:24
SPEAKER_00: So the first term, Jack, um, rent roll.
0:27
SPEAKER_00: When someone calls you or asks, hey, I could send you the rent roll, what does that mean?
0:31
SPEAKER_01: So basically the rent role is you know, industry term, but it basically means what tenant, what you of the units, what tenants are there and how much are they all paying?
0:41
SPEAKER_01: So you get the notion of what the property is doing.
0:44
SPEAKER_00: So the rent roll is just a list of the rents.
0:47
SPEAKER_00: Just a list of the rents.
0:49
SPEAKER_00: If there's if there's three units, there's three rents.
0:51
SPEAKER_00: If there's ten units, there's ten rents.
0:53
SPEAKER_00: Now, a better rent roll, because this will matter when you buy a building that's five or above, uh, the better rent role tells us when did they move in, when does a lease expire, and if it's month to month.
1:06
SPEAKER_00: And so that's kind of it tells the story of the rental tenants.
1:11
SPEAKER_00: And the reason why that's important is because the commercial lender, once you get into bigger units, the commercial lender wants to know um when was the last time that they had a rent increase?
1:21
SPEAKER_00: Because all that comes into play.
1:22
SPEAKER_00: And so again, the rent rule is just a list of rents.
1:25
SPEAKER_00: So pretty simple.
1:26
SPEAKER_00: Pretty simple, yeah.
1:27
SPEAKER_00: Uh, another term that comes up more on is uh market rent.
1:30
SPEAKER_00: Okay, so what is market rent?
1:32
SPEAKER_00: So people will call you and and you'll call them and they'll say, well, the rents are low, but the market rents are so market rent is what the rent really should be today.
1:43
SPEAKER_00: So let me give you an example.
1:44
SPEAKER_00: Let's just say here, here in in Long Beach, a one bedroom, one bath is currently renting out for$1,000.
1:52
SPEAKER_00: Well, Jack and I, we know the market of Long Beach, and we know$1,000 is too low for a one-bedroom, one bath minimum, it probably should be$1,500.
2:00
SPEAKER_00: Right.
2:01
SPEAKER_00: We might look at that and say the market rent is$1,500.
2:05
SPEAKER_00: So the market rent should be the rent of today.
2:07
SPEAKER_00: So here's just my tip is that when you're looking at an investment and a building has really low rents, it doesn't mean the building is bad.
2:15
SPEAKER_00: It just means it just means that the owner who owned it before didn't make it a big deal to keep up with the rent increases.
2:22
SPEAKER_01: Right.
2:22
SPEAKER_01: Or give the tenants a break.
2:24
SPEAKER_01: Uh, another term that usually comes up in our industry with for market rents is performer rents, or you'll hear performa.
2:31
SPEAKER_01: So if you ever hear that, that's what basically what they're trying to tell you is this is what the market rent or performer should be for this apartment building.
2:40
SPEAKER_01: Sometimes it's higher than what we see in the market at given times.
2:43
SPEAKER_01: So uh just something to be aware of when you when you're looking at an OM, an offering memorandum, or a rental sheet or a rent roll.
2:50
SPEAKER_00: Perfect.
2:51
SPEAKER_00: All right, so let's go on to um our third, our third term, cash flow.
2:56
SPEAKER_01: So cash flow, uh basically what it says after you collect rents and pay your expenses after your loan, expenses of the property minus your loan debt, you'll see a cash flow of what you make it in for the property during the year monthly.
3:13
SPEAKER_00: Realistically, if if we're buying a three or four unit building here in Long Beach, uh are we gonna look at much cash flow?
3:19
SPEAKER_01: Probably not.
3:20
SPEAKER_01: Okay.
3:20
SPEAKER_01: Difficult, but if you're looking five plus, what we're we we've been saying this whole since last year, there's more opportunity in the five plus area where you can see some cash flow.
3:29
SPEAKER_01: And with the five plus area uh units, a lender will not lend to you unless the property is cash flowing.
3:36
SPEAKER_00: So that's the most important thing.
3:37
SPEAKER_00: You could buy a four-plex and be because that's kind of that's where that's where they draw a line.
3:43
SPEAKER_00: So you could buy a four-plex and you yourself have the assets and the income to pay for the property to be negative.
3:50
SPEAKER_00: Sometimes we sell someone a building and it's a four-unit building, and they're$2,000 negative in the hole every month.
3:57
SPEAKER_00: You might be thinking, why the heck would they buy it?
3:59
SPEAKER_00: But there's other things to it, folks.
4:00
SPEAKER_00: That's not the end-all be-all.
4:02
SPEAKER_00: A property being cash flow does not mean that um that that makes it a good property.
4:07
SPEAKER_00: There's other things to look at.
4:08
SPEAKER_00: And so, however, when it comes to a five plus, like what Jack said, if you go with an actual commercial lender, they want to make sure that it's making money on its own without your support.
4:21
SPEAKER_00: So cash flow is super important.
4:23
SPEAKER_00: The next term that we'll you'll hear is uh GRM.
4:26
SPEAKER_00: So gross rent multiplier, we love this.
4:29
SPEAKER_00: Um, sometimes people think it's too simple.
4:31
SPEAKER_00: Hey, it's too simplistic.
4:32
SPEAKER_00: But guys, simple is good.
4:34
SPEAKER_00: Simple allows us to make a really good decision.
4:36
SPEAKER_00: So, gross rent multiplier is this.
4:39
SPEAKER_00: If a property is bringing in, say,$60,000 a year, okay, so that's the annual gross income.
4:45
SPEAKER_00: So another important term, annual gross income.
4:47
SPEAKER_00: Depending on the market, we either multiply it by 10, by 10 and a half, by 10.25, by 11, by 12, by 16, there's a multiplier.
4:57
SPEAKER_00: And that is how we know well, what is the market paying for that property?
5:00
SPEAKER_00: So, how do we find out?
5:02
SPEAKER_00: I've done a lot of videos on this, folks, and you guys will you guys will message me from Ohio, wanted my community.
5:08
SPEAKER_00: What is my GRM?
5:10
SPEAKER_00: And I'm gonna put that back on you.
5:11
SPEAKER_00: You got to do a little homework.
5:12
SPEAKER_00: Okay, so let's just take a um let's let's take an eight-unit building in Long Beach.
5:16
SPEAKER_00: Long Beach has a lot of neighborhoods.
5:18
SPEAKER_00: So I'm gonna go and I'm gonna say in the last year, all these eight unit buildings, what did they sell for?
5:22
SPEAKER_00: So I'm gonna take their price divided by the gross income, and I'm gonna come up with a number.
5:27
SPEAKER_00: That's the multiplier.
5:28
SPEAKER_00: And if I do enough of those, I'm gonna see a pattern.
5:32
SPEAKER_00: And I'm gonna tell you the Long Beach pattern right now.
5:35
SPEAKER_00: It's 10.7.
5:37
SPEAKER_00: In Long Beach, five plus is 10.7.
5:40
SPEAKER_00: Now, we have that memorized.
5:42
SPEAKER_00: Why?
5:42
SPEAKER_00: Because we're running numbers every single day in our city.
5:45
SPEAKER_00: Now, I can go outside of Long Beach and kind of know that market too.
5:48
SPEAKER_00: But if you take me out of state, it's gonna sell at a different gross rent multiplier.
5:52
SPEAKER_00: So essentially, is if if someone calls me and says, hey, I'm buying an eight-unit building, I might ask, what's the multiplier?
5:59
SPEAKER_00: And if they say something like 12 or 13 or 12.25, it's gonna be a red flag.
6:04
SPEAKER_00: I'm gonna say, let me look into that a little further.
6:06
SPEAKER_00: You might be overpaying.
6:07
SPEAKER_00: So that's one way that I use it.
6:08
SPEAKER_00: How do you use GRM?
6:10
SPEAKER_01: Same way as you were describing.
6:11
SPEAKER_01: Um, right, you see, like you said, Long Beach, we're seeing 10.71 uh GRMs, uh, but also goes by area.
6:18
SPEAKER_01: So if you're in come core towards the coastal area, there's a little bit higher GRM, but you're paying for a better area, a pre appreciating asset.
6:27
SPEAKER_01: I mean, each property is different, um, and each buyer is looking for different GRMs, cap rates, which we'll go into or price per unit.
6:35
SPEAKER_01: So I use GRM just the same way as one's discussing, but depends on where the property is located.
6:40
SPEAKER_00: All right, so let's go to the next uh uh our our fifth term, cap rate.
6:45
SPEAKER_01: So cap rate is short for capitalization rate.
6:47
SPEAKER_01: Basically, what it means is your rate of return on your initial down payment that you're gonna get out of the property.
6:54
SPEAKER_01: So right now, I'll give you an example.
6:57
SPEAKER_01: In the last three, four years, we're seeing cap rates uh under five, like there were like 4.54 in the area.
7:06
SPEAKER_01: Um now, since last year, 2024, 25, we've been seeing cap rates that we haven't seen in the last what, 10 years, one?
7:12
SPEAKER_01: Seven cap rates, six and a half cap rates.
7:15
SPEAKER_01: So basically, the higher the cap rate, the lower you're paying for the property, the faster you're gonna get your money back out, your down payment back out of the property in years.
7:26
SPEAKER_01: Uh, the lower the cap rate, the higher you're paying for the property, the longer it's gonna take you to recoup that down payment that you're gonna be initially putting down.
7:34
SPEAKER_00: So if you're a seller, if you're a seller, you want low cap rates.
7:39
SPEAKER_00: Correct.
7:39
SPEAKER_00: If you're a buyer, you want high cap rates.
7:42
SPEAKER_00: Because if you're a buyer, the higher the cap rate, the lower the value.
7:44
SPEAKER_00: So the better the greater the return for you is.
7:48
SPEAKER_00: But let me tell you, you don't get to decide what that is, the market decides.
7:53
SPEAKER_00: So right now, what the market is telling us, based on where we're at, and there's a lot of reasons for it.
7:58
SPEAKER_00: It's a buyer's market.
8:00
SPEAKER_00: So a buyer's market means the buyer gets a higher cap rate.
8:02
SPEAKER_00: So when it's a buyer's market, Jack and I are buying and we're telling you to do the same.
8:09
SPEAKER_00: Okay.
8:09
SPEAKER_00: So let's go on to the next term.
8:11
SPEAKER_00: Uh, next one, we hear this a lot industry, value add.
8:15
SPEAKER_00: All right, so value add, every investor calls this.
8:19
SPEAKER_00: Everyone, like out of a hundred, 90 of them will say this, but I'm a value add buyer.
8:25
SPEAKER_00: And they kind of put their chest out like, haha, I'm this value add buyer.
8:29
SPEAKER_00: And I look at them, I said, so is everyone else in the room.
8:33
SPEAKER_00: You're nothing special.
8:34
SPEAKER_00: But I tease, but the reality is everyone's a value add buyer.
8:38
SPEAKER_00: And what value add means is that you're looking at an asset, you're looking at its income.
8:42
SPEAKER_00: And you know, I talk about pulling levers, you know, like we're driving a ship and we're pulling levers to correct.
8:48
SPEAKER_00: Is that you look at a property and you and you and you say, well, it needs a new roof, it needs windows, um, the rents are low, it needs um massive remodels to all the infrastructure, the bathrooms, the kitchens, but you're getting a good deal.
9:02
SPEAKER_00: And you're gonna bring in the sweat equity.
9:05
SPEAKER_00: That's value add.
9:06
SPEAKER_00: You look at the income and you know that the income of today is not the income of tomorrow.
9:10
SPEAKER_00: And I'm gonna say that until my face is blue, right?
9:12
SPEAKER_00: The income of today is not the income of tomorrow.
9:14
SPEAKER_00: When you look at a value add, you realize it's being mismanaged, someone doesn't care about it, someone is over it.
9:21
SPEAKER_00: That's fine, that's gonna happen.
9:23
SPEAKER_00: You come in excited, and you're gonna change it and you're gonna add value to it, force the appreciation.
9:30
SPEAKER_00: And we see this all the time.
9:32
SPEAKER_00: This is uh people who do syndications, you know, they'll buy a building for say$2 million, they'll do some improvements, invest back, and then they're and then they're selling it for a million dollar profit.
9:42
SPEAKER_00: And that's just to give you an example, but that is what we call value add.
9:46
SPEAKER_00: Um, the opposite of value add, which is not one of the terms I'm talking about today, is fully stabilized.
9:51
SPEAKER_00: Turnkey.
9:52
SPEAKER_00: Turnkey.
9:53
SPEAKER_00: Someone's already done it.
9:54
SPEAKER_00: Um any anything you want to add to that?
9:56
SPEAKER_01: Well, value add, you know, Juan and I are both the purchased two properties, or well, Juan purchased two.
10:01
SPEAKER_01: I purchased one uh this year, both value ads, and we're coming out of value add property.
10:05
SPEAKER_01: There's a lot of investors that do the same thing.
10:07
SPEAKER_01: Um, when you call us for value add properties, we'll show you where where you can make the pull each lever to get you to where you need to go.
10:15
SPEAKER_01: And we'll show you examples personally from ourselves.
10:18
SPEAKER_00: The next term is uh operating expenses, or they'll say opex.
10:23
SPEAKER_00: What are the opex?
10:24
SPEAKER_00: All right, because they want to seem fancy.
10:26
SPEAKER_00: If you call us, we're not gonna give you any fancy terms, but what's opex?
10:31
SPEAKER_00: I'll just say, guys, what's the operating expenses or what's the percentage?
10:34
SPEAKER_00: Jack, how do you answer that?
10:36
SPEAKER_01: So, yeah, we get this a lot, and I get this a lot from my clients asking me, hey, what are the average operational expenses in the city of Long Beach or for an eight-unit building?
10:46
SPEAKER_01: So when you get in like an offering, offering memorandum or a setup sheet, something, these are these are just like rent rolls with all the expenses.
10:55
SPEAKER_01: You'll see on one of the pages, it'll show you all the operating expenses, which will be property taxes, insurance, uh, utilities that the landlord pays for, gardening, and etc.
11:06
SPEAKER_01: These are the operational expenses.
11:08
SPEAKER_01: It doesn't include debt service.
11:10
SPEAKER_01: That's some that's completely different.
11:11
SPEAKER_01: These are operating expenses.
11:13
SPEAKER_01: On a let's say eight unit to 10 unit building, operating expenses should be around 35 to 38 percent of gross income.
11:21
SPEAKER_01: So if there's something higher, in let's say I've seen pro operating expense ratio of 42% or for 50%, there is something either rents are low or they're mismanaging the property, or there's there's something off right there, which can be beneficial if you're a buyer where there's a value add right there.
11:41
SPEAKER_01: What about you?
11:42
SPEAKER_01: What have you seen when it comes to that?
11:43
SPEAKER_00: Um, you know, years ago, before insurance went high and and maintenance fees were high, um, we were estimating the operating expenses for a building around 30%.
11:54
SPEAKER_00: And then it started going to 32.
11:56
SPEAKER_00: Now, if I see anything less than 35, I'm gonna say, you're not being honest with me.
12:00
SPEAKER_00: Yeah.
12:00
SPEAKER_00: Because it does cost, you know, it's it's getting harder and harder to operate these buildings.
12:04
SPEAKER_00: So for sure, 35% or higher is what you should look at.
12:08
SPEAKER_00: So even if you see a building and they give you the rents, you don't have to go chase down the operating expenses.
12:13
SPEAKER_00: Just take a piece of paper and already subtract 35% off the top.
12:17
SPEAKER_00: You're gonna be really close to it, anyways.
12:19
SPEAKER_00: And if someone's spending more, you don't have to be like them.
12:22
SPEAKER_00: You could spend less, right?
12:24
SPEAKER_00: Just because someone is overpaying for either property management or repairs or something else doesn't mean that you're gonna make the same mistakes.
12:30
SPEAKER_00: And so 35% is safe to go.
12:33
SPEAKER_01: The one that we've been getting a lot of lately, DSCR.
12:36
SPEAKER_00: With commercial loans, they want to commercial lenders want to make sure that the property can pay for itself, okay?
12:42
SPEAKER_00: So for say every dollar of expense to own and manage this building, they want at least a dollar 25 to come in.
12:50
SPEAKER_00: So the commercial lenders are going to ask for what's known as a debt coverage ratio of 1.25.
12:54
SPEAKER_00: Okay.
12:54
SPEAKER_00: So that's important.
12:56
SPEAKER_00: Every building that we look at, once you get into the five plus, you can't just say, oh, 25% and you could get whatever you want.
13:03
SPEAKER_00: It doesn't work like that.
13:03
SPEAKER_00: It does with fourplexes, but you can't not, you cannot make that assumption with the five plus because it all depends on the value and the income that's coming in for that property and the operating expenses.
13:13
SPEAKER_00: So uh where you could look at two buildings side by side on the same street on Redondaway Avenue here in Long Beach on the 800 block, and they're both 10 unit buildings, and one of them uh you could buy it with 25% down, and the other one needs 40% down.
13:27
SPEAKER_00: Why?
13:28
SPEAKER_00: Because one of them has really low incomes, is what I'm gonna tell you.
13:31
SPEAKER_00: So debt coverage ratio is important.
13:33
SPEAKER_00: Um, I will tell you that that the famous DSCR loans, which a lot of our clients are calling us about, that one is slightly different and it's not viewed with the same ratio.
13:44
SPEAKER_00: That's 1%.
13:46
SPEAKER_01: Yes, 1%.
13:47
SPEAKER_00: At 1%, you are able to meet that debt coverage ratio.
13:51
SPEAKER_00: Now, all in all, I think I would say for the debt coverage ratio loans, and we've done several videos of those, we do uh ask you guys to go check them out.
13:59
SPEAKER_00: Um, with the debt coverage ratio loans, those specifically are probably best for say a four-unit building, but you can apply for an eight-unit building, certainly.
14:07
SPEAKER_00: And and it could allow someone to come in with a lower down payment.
14:11
SPEAKER_00: What's the trade-off?
14:12
SPEAKER_00: Because anytime that something helps you, like lower down payment, there's a cost, okay?
14:17
SPEAKER_00: You don't get it all for free.
14:18
SPEAKER_00: There's a cost.
14:19
SPEAKER_00: So what's the cost?
14:20
SPEAKER_00: Higher interest rate.
14:21
SPEAKER_00: Yeah.
14:22
SPEAKER_00: Anything you want to add to debt coverage ratio?
14:24
SPEAKER_01: Um, no, you you kind of laid it on right there, but I mean, when you said you can only use it for four units, I mean, I've seen lend I've seen uh investors use it for bigger units or even eight plus.
14:36
SPEAKER_01: It just all depends on your own scenario.
14:38
SPEAKER_01: If you have other properties and can you want to get this one property that it's been never been on the market or you've been had your eyes on it, the lender will look at your other whole other assets and use that as well to help the debt coverage ratio for that property.
14:51
SPEAKER_00: Cool.
14:52
SPEAKER_00: Moving on to number nine, NOI.
14:55
SPEAKER_01: NOI is basically net operating income.
14:58
SPEAKER_01: So the net operating income is your gross rents minus your operating expenses, and you have that number, which is net operating income.
15:07
SPEAKER_01: Why is that so important?
15:09
SPEAKER_01: Pricing and everything for the property is based on net operating income.
15:14
SPEAKER_01: One dollar of increase in net operating income can potentially bring you$20 in value to your property.
15:20
SPEAKER_01: So we emphasize a lot, right, Juan?
15:23
SPEAKER_01: Increase your net operating income, you increase your property's value.
15:26
SPEAKER_00: Yeah, um, the net operating income is important because that is one of the important ones that you need to calculate cap rate.
15:35
SPEAKER_00: And so, you know, um, where I've done a video where I called it Uncle Irv, right?
15:39
SPEAKER_00: So then you have the I on top is net operating income and you divide it by value, you come up with rate.
15:44
SPEAKER_00: Or with the I on top, which again is net operating income, you divide it by the rate and it gives you the valuation.
15:51
SPEAKER_00: So in order to come up with the cap rate, you have to have the NOI.
15:54
SPEAKER_00: You have to.
15:55
SPEAKER_00: And so that's one of the important uh ones that you need.
15:57
SPEAKER_00: And so super important.
15:59
SPEAKER_00: If you're looking at a couple properties, so Jack, I mean, if you're looking at three properties, they're all eight unit buildings, and you're comparing the NOIs.
16:07
SPEAKER_00: Um, what are you looking for?
16:08
SPEAKER_00: The one with the higher NOI.
16:11
SPEAKER_00: Well, and price.
16:12
SPEAKER_00: I mean, yeah, everything else being simple is that it that could be a certain way that you make a decision.
16:17
SPEAKER_00: Like that one has a higher net operating income.
16:19
SPEAKER_00: I'm gonna buy that one with all things being equal.
16:21
SPEAKER_01: Being equal, yeah.
16:22
SPEAKER_00: Yeah.
16:22
SPEAKER_01: So the other term we always get, what are the comps for the property?
16:26
SPEAKER_01: Yeah.
16:26
SPEAKER_01: Or comparables, right?
16:28
SPEAKER_00: Yeah, this is important.
16:29
SPEAKER_00: So I want to thank you guys because we have we have uh we built this community of people who are investors, uh, aspiring investors, big time investors, new investors, old, new, everything, right?
16:41
SPEAKER_00: Because investing is something that everyone could do, right?
16:44
SPEAKER_00: Uh so long as now listen, I'm not saying it's easy.
16:46
SPEAKER_00: None of us were given money.
16:47
SPEAKER_00: Jack wasn't given money, neither was I, but we've saved and we and we put away money to get our first investment so that we could get the process started 20 years ago, right?
16:56
SPEAKER_00: This has been a long process that we've been at this.
16:58
SPEAKER_00: And so um the reason I'm saying this is that I know that people are watching us everywhere.
17:04
SPEAKER_00: And I know sometimes people will watch and they'll they'll want to use our numbers, our cap rates, our gross rate multipliers here in our community, here in Long Beach, compare it to theirs.
17:12
SPEAKER_00: But I would say look at your your market.
17:15
SPEAKER_00: So I don't care if you're in Illinois, if you're in Iowa, you're in Ohio, wherever you're at, Nebraska.
17:22
SPEAKER_00: Look if if you're trying to buy a 10-unit building, those are your comparatives, is in your neighborhood.
17:29
SPEAKER_00: What are they selling for?
17:30
SPEAKER_00: What do other buildings sell for similar to mine?
17:32
SPEAKER_00: So this just a comparison.
17:34
SPEAKER_00: It's like if you were buying a car and you're buying a used Tesla, I'd say, great, what do used Teslas go for?
17:41
SPEAKER_00: Right?
17:41
SPEAKER_00: That would be the exact same thing.
17:42
SPEAKER_00: It's really no different.
17:44
SPEAKER_00: How would you answer that when it comes to cops?
17:46
SPEAKER_00: I mean, I think it's important because in order for you to make all these other decisions about about cap rates and gross rate multipliers and return on equities and internal rates of return, everything starts with the comps.
17:58
SPEAKER_01: You're correct.
17:58
SPEAKER_01: Everything starts with the comps and everything you said earlier around your area.
18:02
SPEAKER_01: I mean, here we're in Long Beach.
18:05
SPEAKER_01: The cap rates and comparables three miles down to San Pedro or three miles up in Lakewood is completely different.
18:14
SPEAKER_01: So you have to check what you got to know what your cap rate, your GRM is in your area, what a 10 unit will sell in your area or your city compared to you know what it's going for in that area.
18:26
SPEAKER_01: So if you don't know it, there's um, you know, you can call us, we can try to help you in that area, or ask one of your local resources to find out what that would be.
18:35
SPEAKER_01: That'll help you get a better understanding of what the going market cap rate is in the area, what the actual rent may be, and what the price per unit will be to make a better decision if you're paying the right price or if there's room for negotiation.
18:50
SPEAKER_00: I'm gonna give you guys a bonus term because I just thought of it, because we just wrapped up number 10, but there's a bonus one.
18:54
SPEAKER_00: And and I'll let uh Jack explain this one.
18:57
SPEAKER_00: OM.
18:58
SPEAKER_01: OM.
18:59
SPEAKER_01: So I mentioned this earlier in the video.
19:01
SPEAKER_01: It's short for offer it, offering memorandum.
19:05
SPEAKER_01: An offering memorandum is just basically short for a marketing package.
19:09
SPEAKER_01: It's a package that has all the marketing for the property, pictures, description, um, it'll have all the financials.
19:16
SPEAKER_01: Some great good ones will have loan assumptions.
19:19
SPEAKER_01: Well, it'll tell you if you are going to purchase this property at this price, it'll illustrate a loan with 35% down what it would be, and it'll have all the expenses and it'll have all the rent rolls and everything else in there.
19:33
SPEAKER_01: Um, it'll also give you a description, an overlay of the MSA or the city that's surrounding it, the major city, and kind of give you a background of everything that's going on.
19:43
SPEAKER_01: Another thing with OMs is just be careful with them.
19:46
SPEAKER_01: A lot of them may, you know, they're marketing packages.
19:49
SPEAKER_01: So people are brokers are using them to market it.
19:52
SPEAKER_01: So you should also know what we discussed all earlier: what are the operating expense averages in the area, what are the price per square foot, uh, price per unit.
20:02
SPEAKER_01: So these things are you should know through your local resource or call us.
20:09
SPEAKER_00: Um, and and I'll just add a couple things.
20:11
SPEAKER_00: You know, when Jack said a really good, a really good OM gives us rental comparables.
20:15
SPEAKER_00: Like, what do similar properties rent for?
20:17
SPEAKER_00: Why?
20:18
SPEAKER_00: So that you could figure out your performer rent or your market rent.
20:20
SPEAKER_00: So really important.
20:21
SPEAKER_00: A really good OM gives you comparable, similar comparable sales.
20:26
SPEAKER_00: So if you, I don't know, if you're looking at a 25-unit building and you're in Iowa and you're like, man, I'm looking at this property, call the agent, just ask for an OM.
20:34
SPEAKER_00: Email me the OM.
20:35
SPEAKER_00: Sometimes you could just download it for free, look through it, and compare the building you're trying to buy with the comparables they've outlined there and say, yeah, they're similar.
20:44
SPEAKER_00: Drive by them and say that they are really similar.
20:47
SPEAKER_00: Well, now you have a lot of good data.
20:49
SPEAKER_00: And yes, we are in the business of sales, and sometimes we could, you know, make things seem a little more rosier than they really are, but take it upon yourselves.
20:57
SPEAKER_00: You know, you got to learn, you got to ask the questions, you got to uh do your homework.
21:02
SPEAKER_00: But the OM, if it's done right, could give you a lot of good data so that you could come up with your gross rate multiplier and your cap rate.
21:08
SPEAKER_00: But don't just stop there, do your own research to do that.
21:11
SPEAKER_00: So there you have it.
21:13
SPEAKER_00: Hope you learned a lot.
21:14
SPEAKER_00: Uh, it's 2026, it's January.
21:17
SPEAKER_00: We're gonna continue bringing you content videos.
21:19
SPEAKER_00: It is our goal that we teach you how to build wealth through apartment ownership.
21:23
SPEAKER_00: This is something that Jack and I uh were passionate about.
21:26
SPEAKER_00: We've done ourselves.
21:27
SPEAKER_00: We did, we were not born with a silver spoon.
21:30
SPEAKER_00: Um, and so our message is if we could do it, you could do it.
21:35
SPEAKER_00: If there's a topic you want us to cover, please let us know.
21:38
SPEAKER_00: Keep watching, keep messaging, keep referring to us.
21:41
SPEAKER_00: We love hearing from you until next time.