With a record number of foreclosure filings, it appears that the multi-family investment arena's time has come. While it had seen a drop off during the ‘housing boom", apartment management companies have reported a record number of inquiries from would be renters. Former homeowners that have or are facing foreclosures are in search of a place to rent, and reports show that there is a short supply of rental properties in many markets.
Multi-Family Investments Thought To Be Road To Both Short Term and Long Term Wealth-
More than likely you are wondering why apartment building investing is such a great idea. Well, one of the main reasons to consider a real estate investment in this particular market is because they usually carry fairly low risk and they also help to keep up with inflation because they only deal in short term leases. So, as the market begins to rise, you can increase your income as well. Also, when you get involved in investing in apartments, you'll find that you can enjoy equity appreciation as well as good cash flow. Many investors have found that investing in apartment buildings is a great choice because of the huge demand and the low risk. In fact, many statistics are showing a rise in demand for apartments, since so many people cannot afford to own their own home
If your primary goal is income from properties or a combination of income and appreciation then multifamily may be for you. You can start by buying a triplex or fourplex. These are considered residential properties for lenders and have similar financing guidelines to buying homes, while apartment buildings with 5 or more units, for lenders, are considered commercial properties and abide by commercial financing guidelines. While single family rentals have been in demand, seasoned investors have portfolio's that include a mix of single and multi-family properties
Multi- family properties can be used effectively as a building block, in building real estate wealth. Many seasoned real estate investors will tell you, that finding an apartment building that is not being operated efficiently, but is listed at a good price, provides an avenue to increase its net income by making some improvements and routine maintenance. Apartment buildings, when purchased and managed properly, have the ability to generate consistent and substantial cash flows.
Keep in mind if you do refinance for improvements, your mortgage payments will be higher as will the real estate taxes. It is important that your increased rents will cover these larger amounts. While multi-family properties can be lucrative investment, if you are not careful they can like any other real estate investment prove to be financially disastrous
Always Have A Plan!
Decide what type of property you are looking for; (i.e. 5+ units)
Start looking for properties that fit your criteria, do some research on the demographics in areas that you are interested in. You want to be able to answer potential tenant questions regarding, employment, schools, public transportation, shopping, etc.
Contact an experienced Realtor to assist you in finding your investment properties, or if the property is listed "For
Sale by Owner", contact the owner. If you find a property that is not listed for sale, but looks run down, you might want to contact the owner and ask if they have thought of selling.
Advantages of apartment building investing include:
When applying for a loan, securing financing is easier than securing financing on other deals because the focus is taken off the borrower and puts it on the property. Lenders focus their attention on the building and whether it can support the debt payments.
Investing in multi-family properties provide you a pool of people that will pay off your mortgage and even cover the maintenance costs, providing you with passive cash flow.
Although initially, you will have to put some sweat equity into these properties, and the management of these properties can be intensive, in time you should be able to hire a management company.
If after a time you decide that you want to sell and purchase larger rental property, a 1031 tax deferred exchange can move the entire profit from the property's sale into another larger multi family structure.
If you have been considering investing in apartment buildings, or other investment properties, please feel free to contact me. I have several investors and Realtors that have properties available. In addition, I can provide information on financing available.
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