Apartment building investing is often intimidating to many residential real estate investors, which is what keeps them from realizing the outstanding cash-flow and long term equity returns that investing in sound apartment properties can bring. I will discuss 5 of the most fundamental reasons that apartment investing offers such a lucrative opportunity
Reason 1: More units equals higher income potential. Just due to the nature of apartment buildings your monthly income from one successful transaction is bound to be much higher than that of a single family house. Plus, you have the advantage of multiple tenants paying rent to cover any vacancies that occur so that the financial impact is not nearly as hard when someone leaves or gets evicted.
Reason 2: Less competition for properties. In any market, there is much less competition looking for multifamily real estate than for single family. The investors who are involved in apartment transactions typically have more knowledge than the average single family investor, luckily knowledge is very easy to attain.
Reason 3: Less owner management. The ability to afford professional management companies is a great advantage of commercial or multifamily real estate. Because the margins are higher, it is often possible to hire companies that can take a majority of the day-to-day responsibilities away from the owner.
Reason 4: Lenders are on your side. In single family homes, lenders often only care about the comparable sales and appraisal to determine the value of your investment. They are not “as” concerned about the financials as they are in multifamily real estate. This is good news for you because lenders will scrutinize the numbers as hard, or harder, than you will and if the deal does not make sense, many will not make the loan for you in the first place.
Reason 5: Higher “return on energy”. Due to the nature of commercial real estate, securing a property with 25% equity in a $1 million building is equal to $250,000. Conversely, 25% equity in a $100,000 single family home is only $25,000. It is not 10 times harder to buy an apartment building, but the returns can easily be 10 times or more over single family homes.
Now that you have these great reasons to invest there’s nothing holding you back from there. A few tools and a new basic knowledge base is what you simply need so what are you waiting for?
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