[Note: To follow is an excerpt of an interview with Michael Minervini, founder of Multi-Family Specialist®. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/041509.]

Mosca: Where is the economy today, and what do you expect in 2009 and beyond?

Minervini: The market is going to be leveling off over the next year to two. I try not to pay attention to any of that negative news and focus on the things that are making me and our agents money. That's the key. As far as expectations are concerned, I'm fully expecting the rates to stay where they are and the market to rebound maybe not to the prices of '04 and '05 but rebound in the way that properties are actually going to start moving again. That is one of the reasons why we are focusing on multifamily because it really is an untapped niche that is still making a lot of agents money when done properly. I'll give you an example. This morning I was doing some research for a few clients that were looking for 48 properties and out of about 25 that I researched, I found four that actually have over 12% return on investment. I had one that had a 15.7 percent return on investment with actual rents and actual expenses. It's exciting to be able to show somebody a different vehicle where they are going to do very well as opposed to something that is completely out of their control, which is coming in the form of their IRAs or any of their retirement accounts.

Mosca: Did you pinpoint submarkets within your overall market?

Minervini: Every day. We are not talking about rare instances. If an agent is knowledgeable and they understand exactly what to look for and the basic principles of what an investor is looking for, they will be able to find good properties. It all depends on the size of the property and exactly what the investors are looking for. The bottom line is a good investment can absolutely be found in multifamily, there are just no two ways about it.

Mosca: Can you tell us about your multfamily designation, the Multifamily Specialist?

Minervini: We are a brand-new designation. We just went national two months ago. We are actually in eight states right now and we are looking to be in the 50 states in the next six months. We are talking with different brands right now to launch nationally with their companies and to be the actual trainee designation choice for multifamily properties. We are the only designation nationally that focuses specifically on multifamily properties. I have many designations. I would say half of the designations that I have, I have earned in a several day course. We're comparable with testing and certification. What we do is on a very simple scale. We teach agents everything they need to know about a multifamily property investment and sale from start to finish. The course is usually done in six to eight hours over the course of a two day live course or most of our agent members are taking it right on our Web site. [If you want to learn more about the multifamily specialist designation or multifamily investments, go to incomepropertyinvestmenttalk.com/041509].

Mosca: What are some of the other specific benefits to earning the designation?

Minervini: The key is agents learn a hand full of items that are going to take them through a multifamily sale. One of those is being able to determine if a property is truly profitable. That's first and foremost. The next thing that we do is to teach the agents all of the different key calculations that they need to know on a property, meaning the basics, the net operating income, capitalization rate, return on investment, and debt service coverage ratio. We teach them how to calculate vacancy rates. We teach them all those basic formulas so that they can look intelligent to an investor and actually figure out if a property does make sense. The next thing we teach is how to create and read a profit/loss statement. It is vital that whenever they market a listing whether it is on the Multiple Listing System or not, that they include a profit/loss statement because an investor needs to see that, and if they want to look intelligent to an investor they want to have that ready.

Mosca: Is now a good time to invest in multifamily?

Minervini: It has never been better: a) we have low prices, b) we have phenomenal interest rates, c) we have low vacancy rates, and d) we have high rents. A perfect storm. Investors need to decide if they are looking to keep an investment with little control or to invest in something they have complete control and will build equity over time.

Mosca: The equity you derive from your first, second, third, or however many multifamily investments you have, can you take that equity earned and move it into another property via 1031 tax deferred exchange?

Minervini: Correct. We use 1031 exchanges as an education tool, too. Most real estate agents do not know what a 1031 exchange is, never mind how to execute one with an intermediary and going through the entire process. We are showing agents things that they've never seen before. Agents go through the training, have their license held in good standing, and they have to maintain the designation each year. That's how they keep and earn the designation. In essence, we realized that we really needed to put the cart before the horse and give them the training, give them the designation so that they can go out there and promote it to their clients.

Eric [a caller]: As far as commercial multifamily is concerned, how is financing coming along? Are people starting to loosen up as far as commercial properties and do they allow seller financing as well as far as carry backs?

Minervini: I do not subscribe to the notion that there is no financing for residential or multifamily property. It's bogus. You and your clients should be focused on the fact that you need that 20 to 25% down. Number two, points in many instances are happening, lending institutions are charging 1% or 2% origination. Have paperwork, leases, profit loss statement and all the correct figures in line when applying for a loan. If you use those basic parameters, a lending institution will lend on a property that is worthy but it still has to fall in line with the regular comparable sales that we would do for any other piece of property.

Mosca: What is your golden nugget?

Minervini: Millions of foreclosures equals more renters equals multifamily sales. If anybody is doubting themselves and thinking that maybe this isn't the time to get into multifamily sales, they better get on the train really quick because it's happening and it's a locomotive moving fast.

Published: May 14, 2009

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Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.