Buying apartment buildings used to be what people thought of when they were considering investing in real estate. However, as a result of the whole flipping phenomenon the popular idea of investing in real estate has become something more akin to fixing up junker homes.
Not that there is anything wrong with fixing up junkers, you make good money. But when you’re attempting to determine what’s the best return on your time, repairing a junker just does not compare to buying an apartment building.
Let us consider both, just for a little perspective.
- When you purchase an apartment building you have much less competition; you’re one of just a few investors in your market moving after bargains. Chasing flippers you are one of hundreds. Why? Houses are simple for people to get their heads around, so everybody and their cousin does it. Apartment buildings are more challenging, due to the high dollar amounts involved and more information to master, so fewer people take them .
- Buying apartment buildings makes you”considerably” more cash. When you fix up a home you get one check one time; when you sell. You may have 100 hours into a rehabilitation deal, and when you sell you internet $30,000. Nice! However, take the same 100 hours and place them into purchasing a 50 unit apartment building. Now, not only do you get paid more, your apartment building pays you multiple times. When you close you get money back from pro-rated rents, then you cover yourself a management fee for raising private money for your offer. Each month you get positive cashflow in the property. Then, 18 months or so after closure, after renovating the units, raising the rents and filling vacancies, you refinance and pull out a six figure, maybe a seven figure check. These are loan proceeds and tax-free.
- If your intention is to become wealthy, building a multi-million dollar net worth, buying apartment buildings with get you there faster. You need fewer deals to reach the one million dollar mark (one deal may do it for you) making it far more achievable.
- Although most real estate investors are frightened of apartments due to the huge numbers, buying apartment buildings is actually less risky than buying homes. If any single tenant stops paying rent that you still have cashflow coming in from all of the other paying tenants at the property to pay your own expenses. When a tenant in one family stops paying, that is it! You are 100% empty and personally on the hook for the mortgage, insurance and taxes.
- Buying apartment buildings permits you to achieve economies of scale, which makes your per unit costs lower and cashflow margins greater. Because it’s possible to generate more usable income with apartment buildings, it’s financially feasible to hire a professional management company, freeing you from day to day management of their property.
- Buying apartment buildings and handling them efficiently provides you and your family with a lifetime of residual income.
You might be interested in investing in real estate foreclosures
As you can see buying apartment buildings provides you with everything you wanted when you first considered getting into property; large lump sums of money, monthly cashflow that develops over time, the time freedom to actually enjoy your life.
