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Posted about 9 years ago

The Power of Apartments

Now is the best time in history to invest in apartments.

A bold statement, it’s true; but backed up by solid fundamentals that are not in a “bubble”.

Apartments offer a solid real estate investment that is uniquely mobile; a business that you can run from anywhere without ever collecting a single rent check or plunging a single toilet.

Apartments create protection from market volatility, establishing a wealth management plan that can create income for life.

You have tenants paying down your mortgage creating assets and a diversified portfolio.

Like all successful businesses, once you learn the “system” of identifying, analyzing, purchasing and managing your property manager, the potential for growth is unlimited.

Why Apartments?

Multifamily units are a great way to build cash flow and long-term equity creation. The beauty of this type of investing is that it is relatively passive and less risky than investing in single-family homes, or other turnkey real estate investments.

For many, the prospect of starting off with a multifamily property can be a bit intimidating but we're here to tell you that it shouldn't be.

With the right education, knowledge and partners it can be your fastest path to grow your wealth.

Who is Creating the Demand for Apartments?

DEMAND

  • Baby Boomers (76 Million) looking to trade to low maintenance living
  • Echo Boomers (72 Million) seeking stress free apartment living
  • US Immigration continues to accelerate
  • Continued foreclosure crisis driving millions of people into apartments

SUPPLY

  • New construction of apartments cannot keep pace with demand.
  • Vacancy is declining and rents rising

CASH FLOW

  • Cash flow is king in today's market.
  • It's also the key to security in supporting yourself and your family, and creating a legacy for future generations.

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. Even with major multifamily construction, and [stat] apartments coming online, the demand is still [stat]

ONE ROOF

Having your tenants under one roof provide you the ability to employ professional property management, allowing you to manage your manager from wherever you may be.

PROTECTION FROM VACANCY

One vacancy in a 50 unit building is planned for and hurts much less than when your single-family tenant moves out. These single-family “cheap” rentals are what many real estate investors are offered as an entry point to real estate investment – we challenge you to think bigger!

Reasons to invest

  • Appreciation - even with a modest calculation, your building will increase in value over time.
  • Cash Flow – The money that is left over after expenses and debt service is paid – this is “Mailbox Money”.
  • TAX ADVANTAGES - Profits on the sales are taxed as Capital Gains, and apartments are perfect vehicle for 1031 exchanges.
  • Leverage - Banks are lending on Multifamily! In commercial lending, it is much more property based than individually based.
  • Amortization - Your tenants are paying off your mortgage each month!
  • Depreciation - A huge tax advantage, allowing lots of property write-offs dramatically minimizing the income that shows on your tax return.


Comments (9)

  1. @Keith Cullum, it depends on a few factors.  Firstly size.  There is not much competitive rate lending non recourse for under 1MM.  That said, there are Fannie and Freddie products that offer small balance 1-5MM non-recourse loans.   They will look at the global picture- the deal, you, your team, etc.  Community banks may be less likely to do non-recourse especially for a first one but, they certainly do exist.  We have 2 clients now that are buying a 4MM property in Ohio, and are in the process of getting a non-recourse fannie loan.  Each of them have some experience.



  2. All good information. I am in the process of searching for my first investment property, and have been vacillating back and forth on which one would be best for my "first" one. Apartments are very intriguing and all the feedback validates that they provide greater scale of cash flow. How would banks respond to a new investor with no existing investment property applying for an apartment loan, most notably one that is non-recourse?


  3. @Steffan Johnson, these would be for apartments


  4. Hi Chris Urso

     Are these quantified as condo units or apartments?  


  5. Last fall I completed my MBA Masters Thesis on the value and security of multifamily real estate investing. The most effective way at analyzing the market and choosing a location based on various statistics.  20 units has the most cost benefit for risk mitigation.  So it's essentially a race to 20 units to realize the most benefit from multifamily investments.  I'm glad to see this was validated from an outside source.

    Now just to find a way to get into the larger multifamily property. 


    1. 20 units or at least 20? What about 40 units?

      what did you find about location?


    2. Hi Mike! Is your thesis published anywhere? I'd love to see it. I'm trying to convince my husband to look at multifamily properties in the 20-30 unit range, and I'd love to have some data to back me up!


    3. Hello Mike, would be very interested in reading your thesis. Is it published anywhere?