Multi-Family

There are only three reasons to be in Real Estate, if any one tells you any differently then they don’t understand real estate investing.

The three reasons to be in real estate are Cash Now, Cash Monthly and Cash Later. Let’s take a closer look at each one of them.

Cash Now. Let’s face it, we need money to live and pay the bills. With out this cash we would have to go back and work for “the man”. If you’re not a full time investor, this is a reason why a lot of people are afraid to quit their job and work for themselves.

Cash now is the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures we need the cash from each of these investing models to put food on our tables and clothes on ours (and our children’s) backs.

Cash Now is good. Having rehabbed over 450 properties in just a seven year period, (I use each of the above methods to acquire my properties)  I’m used to those big checks coming in. But then I realized that if I didn’t continue to get Cash Now through flipping properties, then I would not have any cash coming in at all. Which meant I was not as free as I thought I was.

So I changed my strategy. While those big rehab checks were coming in, I put some of money in my account so that I could live, and then I started to put the rest of the money in Apartment Houses.

Owning smaller Apartment Houses is virtually the same as investing in single family houses. If you’re doing your marketing, you run across Apartment Houses all the time. If you are like most investors, you probably just ignore them and continue to search for the next single family deal.

Apartment Houses will give you greater Cash Monthly. In just a short time, you can build yourself a substantial passive monthly income just from your Apartment Houses. That’s how Robert Kyosaki does it in Rich Dad/Poor Dad.

Cash monthly will give you freedom. Freedoms to do what ever you want when you want. I’m not telling you to stop buying and flipping single family houses, that’s Cash Now. I’m saying to get Cash Monthly (Apartment Houses), use some of your Cash Now (single family flips) and buy yourself some freedom!

Pretty soon you will be building an empire. You’ll have enough Cash Monthly to be able to take a month off in the summer or what ever else your freedom desires! If you were only flipping single family houses and you took a month off in the summer, you wouldn’t have any income coming in.

Do you see how Cash Monthly will give you freedom?

You can get some Cash Monthly from owning single family houses long term but not as much and not as fast as owning smaller apartment houses. And it’s a lot riskier to have all of your money in single family houses.

What happens if you lose your tenant in your single family house? You loose all of your income. You’re going to have to dip into your own savings to pay the mortgage until you get a new tenant. That hurts!

If you loose a tenant in a three family house, you’ve only lost one third of your income. The other two floors will cover your mortgage until you get another tenant. That’s just one of many reasons that owning small apartment houses is smarter that owning single family houses, but that’s another article all together.

Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange or refinance those apartment houses somewhere in the future.

You see, with apartment houses you have an appreciating asset. No only is it appreciating every month but your tenants are paying off your mortgage. So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger!

You can sell your property and get a boat load of cash. If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so then you will want refinance to get you cash out.

Not 100% of your cash, which will only get you in trouble. You should take out about 75% of your cash leaving 25% equity in the building, that way if there is a down turn in the market, your protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?

Now take that money and go buy some more apartment houses and get some more Cash Monthly! In doing so, these apartment houses will start appreciating and the tenants will begin to pay down your mortgage for you. You’ve just increased your net worth because you have increasing equity in one or two more buildings instead of the building that you started with.

Can you see how your empire is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make filthy stinking rich! Which do you prefer?

• Add Value: What is great about adding value to your business is that there is no limit to how far you can go.  If you think your business is good, then be better.  If you think your clients and employees are satisfied with their time in your business, then make them even more satisfied.  People will grow to appreciate your business once you are able to effectively go above and beyond their expectations.
• Stronger Leadership: In case you remember last week’s e-newsletter where we talk about leadership, being a strong leader means putting your employees’ trust in you and reminding them why they should in order to accomplish both short term and long term goals.
• Expand Your Network: Have you heard any successful business leader say “I have enough contacts”?  Me neither.  You should always be expanding your network with potential clients and colleagues because the more people you know, the greater chances you will have putting together a deal.  Did I mention that new contacts you bring into your circle, also bring the contacts in their circles as well?
• Recruit the Best: It is nearly impossible to succeed in this business as a one-man-show.  We all have our strengths and weaknesses, and it is your responsibility as the leader of your business to bring in people that excell at the things you are weak at.  Once you cover your weak spots up with heavy-hitters, your team will be unstoppable.
• Quality Profits: As soon as you learn to define your services to appeal to the right market, then you can expect to see strong profit margins with the right clients.

 

Now is a great time to purchase real estate! Let’s face it; we are now living in a buyers market. With more and more properties on the market, sellers are facing some stiff competition, and are being forced to lower their prices in order to contend with other hungry sellers. This leaves ambitious buyers with a great opportunity, however, while timing could not be more perfect to buy your first piece of real estate, it is vital to know what kind of property is going to best maximize your profits. After all, the goal ofinvesting in real estate is making as much money as possible, while spending little.

When most people think about investing in real estate, the first thing that comes to their mind is duplexes and single-family homes. This is because many people are under the false impression that certain money saving strategies like fix and flip, and no money down is only available when buying single-family units. In fact, these same options are available when purchasing multi-family units like apartment buildings. In reality, purchasing an apartment building is often the smarter, and most cost effective choice. An apartment building can be easier to occupy, less time consuming, and can also be the most efficient way to maximize your profit.

With the demand for houses increasing in today’s buyers market, developers are continuing to build more homes. As we all know “demand” gives these developers the power to price these new properties as they see fit, and that price is more than likely going to be high, however, many people cannot afford to pay the $1,200.00 mortgage that comes along with the increased price of the home and look to a more affordable way to live. In this case, apartments, with their lower monthly rent, become more appealing to buyers.

Lets not forget, that the potential for increased demand in these apartments, can increase the cost of rent, because with even with an increase in the amount of rent that needs to be paid per month, the gap between mortgage payments and rent is still quite large, leaving apartment buildings as the more affordable option. Don’t forget, though, that many people are still caught in the intrigue of owning their own home, and while an apartment can be appealing to a younger crowd, they are not as appealing to those looking to raise a family, or to start their new married life. This in itself is advantageous to you as well as a buyer because while many people are looking in the market for homes, you can be facing less competition in the apartment market.

When you invest in an apartment building, you have the ability to hire someone to manage the property for you. You, as owner of the property, can enjoy all of the benefits of owning the property, while others put in the effort and the work to keep it running effectively and smoothly. While hiring others to manage your property can help to save you time, the ease of having all of your units in one place can also be very efficient. When purchasing several one family units, your properties can be spread out in several different areas. Separate home leads to separate bills, mortgage statements, etc. You, as property owner, would have to spend a great deal of time traveling from property to property to ensure that everything is running as it should be. With an apartment building one stop can lead to all units.

When buying a home, owners’ expenses often include taxes, and insurance. These expenses do not cover any maintenance that may become necessary to the property or any other problems that may occur, which could make it necessary for the owner of a home to dig in to his own pocket in order to solve these problems as they arise. However, went renting an apartment building, the expense include maintenance of the property, utilities, management, taxes, and also insurance. This can make the cost per unit of the building less expensive for the owner, which makes owning an apartment building, once again, more cost effective.

Listed above are only a few reasons as to why it is a better deal as an investor to invest in an apartment building vs. a single-family unit. Investing takes a great amount of research, and I would expect you as a homebuyer to do your homework before going out and buying any property!