In tough economic times and periods of prosperity alike, people are looking for sound investment opportunities. People desire investments that are low risk but yield great returns. While such opportunities are hard to come by, owning multifamily properties offers you the best of both worlds.
No. 1: No More Dealing with Tenants or Toilets
You can outsource your property management to professionals. This allows you to go on vacation, spend more time on the golf course, and focus your attention to building more business and more wealth.
No. 2: Your Economic Reality Doesn’t Matter
Think you can’t get into small apartments because you are flat out broke? Think again. You can buy with none of your own cash or credit. It is easier to get financing on apartments than on single-family homes. The more you borrow the less they look at the borrower’s credit. You can raise private money to cover any cash requirements.
No. 3: Apartments Designed as Wealth-Building Machines
What’s the difference between one house with one roof, and an apartment with 20 units under one roof? Apartments were made to cash flow even with nothing down. Houses are meant to be sold to homeowners. You can convert houses to rental properties, but apartments were intended to become income-producing properties
No. 4: Maintaining Apartments Easier Than Houses
You receive better leverage of your time and effort. It is much easier to maintain a 10-unit apartment building than it is to maintain 10 single-family houses. Plus, you can save money because of the proximity of your doors and your management company’s economy of scale, keeping your costs low.
No. 5: You Can Literally Increase Value in Minutes
The value of income properties is based on the income. It is a function of the net operating income and you can create value by raising the rents and cutting the expenses. You will then know how to invest your money and your time.
No. 6: Small Apartments are the Sweet Spot
While it seems everyone else is consumed with the quest to land houses, you will find limited competition in the multi-family space. And the banks? They are more interested in large apartments. There are fewer people out doing small apartment deals because they lack specialized knowledge and they lack mindset.
No. 7: More Doors, Less Risk for You
Small apartments offer you less risk from the standpoint that you have multiple tenants and multiple revenue streams. An apartment is a business. If you have a house and you lose your tenant, you have to eat that cost until you find another tenant. There is mitigated risk through apartments.
No. 8: Easy Borrowing with Non-Recourse Financing
The more money you borrow, the easier it is to borrow. When you get to borrowing $2 million and above, it becomes non-recourse financing and this means the asset is the sole security for the loan. There is no one personally guaranteeing the loan.
No. 9: Don’t Forget the Condos
You can buy apartment buildings and convert them into condominiums. It is a different strategy because you are putting all of your cash forward and then pulling out. It is not a long-term hold strategy.
No. 10: Rental Demand Couldn’t Be Higher
The sub prime lender bust. With sub prime mortgage lenders falling out of the market, there are people who cannot qualify for houses and foreclosures are up. This means that the demand for rentals is going up.
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