ForeclosuresMass - ForeclosuresMass Monthly - Nothing Succeeds Like Success - Gail McCarthy Powers Her Way to Profits (October 2007)

Think you can't get to the next level in real estate investing? Then you need to meet Gail McCarthy. A dynamic personality who sees opportunity wherever she is, Gail has closed two deals on 100+ unit apartment buildings in Alabama and has now set her sights on commercial real estate. She sat down with us to talk about her journey and how she's been able to power her way to the top by leveraging her skills as an investor in single-family properties.

ForeclosuresMass Monthly: Gail, how did you get started in real estate investing?

Gail McCarthy: I began buying single-family pre-foreclosure properties in June 2004 - mainly due to an interest and desire to get involved in a hot market. Why single families? I couldn't find any multi-families that would cash flow in the Manchester, NH area, which is where I live.

* Next 37 17 investors only!

GM: Yes, I did flips, but I didn't buy properties that needed intense rehabbing. Instead, I had contractors do the big things, such as replacing the roof or windows, while I did general fixes, such as painting and replacing appliances.

The market changed however, which led me to start looking at large multi-families. I was seeking better markets, trying to find emerging markets where properties could produce positive cash flow and were appreciating in value.

That's when I attended David Lindahl's boot camp and what I learned from him made a lot of sense. Namely, if you want to mitigate risk, apartment buildings are the way to go. If you have 100 tenants and one of them leaves, it doesn't adversely affect your cash flow, the way it does with a 2- or 3-unit multi-family.

GM: The first deal happened in 2005. I was part of Dave's Platinum Group, which had 16 people in it. Fourteen of us joined together to purchase a 100-unit property in Huntsville, Alabama.

What came out of the boot camp and that deal, however, is that I met a number of like-minded people. Five of us joined forces to create CPI Group, LLC, and last July we bought our first property together - a 152-unit apartment building in Decatur, Alabama.

GM: This deal was somewhat of an offshoot of the first deal with Dave. As part of his Platinum Group, we had to research seven markets across the U.S. We all met and looked at properties in Dallas, but ended up buying that first apartment building in Huntsville. Because we had done all that research, my partners and I really liked what we saw happening in Alabama, so that led to the second deal.

GM: That's a great question, because yes, I did go into the Alabama deals with preconceptions about the South. I'm a native New Englander, and I spent twelve years in the San Francisco Bay Area, so I do have more of a northern outlook.

However, our research showed the Huntsville market is hot. Did you know it has the highest number of engineers per capita in the U.S.? You have NASA rocket scientists, tremendous research, auto manufacturing - a lot of brainpower. Sperling's and Manpower rated Huntsville as one of the top ten cities for job growth; and Careerbuilder.com named it one of the top cities for job seekers. I didn't know this until we did our research.

GM: Distance is the main challenge. Once we (CPI Group, LLC) found the property we wanted, after on-site and long-distance due diligence, we then had to come back home and conduct the sales process electronically leading up to the closing. On top of that, my group is dispersed across the U.S. - New Hampshire, Massachusetts, Arizona, and Connecticut - so it took some effort to ensure everyone was in the loop. We would split up the tasks and work by phone, fax, and the internet.

The real challenge was keeping things going and getting good information. Because we weren't physically on location once the initial on-site due diligence was completed, we couldn't ensure the work we had stipulated in the contract was being done. So when we did our walk-through that morning before the closing, we realized all sorts of things hadn't been completed.

We ended up having a grueling closing - what was supposed to have taken a couple of hours took one full afternoon plus an entire day.

We sat around a large conference table with the sellers and beat each other up for hours. My partners and I went in to the negotiation process with the possibility of walking away from the deal. But the sellers wanted to sell, and we wanted to buy, so in the end, we got back $70K. By the end of the negotiation process, we were all exhausted, but it was a good ending and worth the final outcome.

FMM: David Lindahl talks about the fear of too many zeros. How did you overcome this fear?

GM: I did have fear of zeros - especially because I went from buying properties that cost a few hundred thousand dollars to a few million dollars! To keep the anxiety and panic at bay, you have to take a few deep breaths, wait for the adrenalin to dissipate, and then start crunching your numbers again. I no longer have a fear of large deals. I'm also no longer interested in the smaller deals such as single families or properties with fewer than 100 units.

GM: My shift in mindset has made me more interested in commercial real estate. I live in Hooksett, NH and we're experiencing tremendous commercial growth here and all around Manchester. As a result, I've become a commercial real estate agent for ReMax Elite.

I love it! First and foremost, I'm an investor, but now that I'm working with business owners and investors all day, I get to work on deals, meet developers, and see real estate from a very different perspective. I love being in the commercial game - it's keeping me very sharp.

I'm also very interested in commercial pre-foreclosures. I'm watching the auctions and doing the calculations. What has surprised me is how I've been able to leverage the skills and knowledge I gained while investing in single-families - meaning I'm looking at and analyzing commercial properties in much the same way that I did when investing in residential real estate.

Gail McCarthy is a partner with CPI Group, LLC, a real estate holding company acquiring large multifamily residential properties throughout the United States. She's also a commercial real estate agent with ReMax Elite. She can be reached through her website at http://www.gailemccarthy.com/ or by phone at 603-623-0660.

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