Too many investors are under the mistaken impression that real estate is no longer a viable vehicle for their money. The reality is that a multi-family apartment can be a great addition to an investment portfolio. In these difficult financial times many families are being forced from their single family residences, switching from homeowners to tenants and apartment buildings are more in demand than ever.
With foreclosures coming at a record pace in the country, many people find it difficult to find affordable housing to replace their homes that they can no longer afford with rising mortgage costs. In addition, refinancing their existing homes becomes more difficult with tighter controls over mortgage lending, making it more difficult to get funds to get out of their heavy debt. Many real estate investors shy away from owning rental properties, with visions of perceived problems often associated with apartment ownership.
The idea of spending their spare time maintaining rental properties and pursuing late leases has led many investors to turn to other forms of investment to supplement their portfolios. However, the return on apartment building investments, especially in today’s volatile housing market, should provide more reason for savvy investors to consider this type of investment. Understand that regardless of economic conditions, people will always need a place to live.
Consider the opportunity to buy other forms of investment, such as stocks and bonds, with a 20 percent drop. There is very little chance for this to happen with most investments. On the other hand, an investor who can put down 20 percent of the purchase price for an apartment building has a good chance of getting the funds needed to buy the property. Buying an apartment building offers investors millions of potential tenants and provides a better return on money than buying foreclosed homes in a depreciating market. In fact, many people use owner financing and actually buy an apartment building with no down payment at all!
When searching for apartments, care must be exercised to ensure the property has been maintained and can be purchased at current market value, not at inflated prices. Many existing properties, which have been well maintained, can offer the opportunity to receive higher rents that can compete with newer apartment complexes, without the higher initial purchase price.
With any investment in real estate, the main benefit of ownership is being able to take advantage of the investment. With most lenders willing to lend 80 percent of the property’s value, any increase in valuation will not only increase the property’s value, but will also increase the buyer’s return on initial investment. Apartment owners can count on cash flow from their investment, which is the money left each month after all expenses have been deducted from rental income. This cash can be placed into an interest-bearing account to increase the return on investment.
An apartment building in the right neighborhood can also increase the overall property value in the neighborhood with proper care and owners who view property as an investment vehicle as opposed to seeing it simply as an income generator. Most apartment owners have found that if they take care of the property, as well as their tenants, their return on investment will take care of their finances for the future.
If you’re looking to expand your investment portfolio and want to learn more about the many benefits of apartment building investing, I suggest you read my free mini course on apartment building investing which can be found at Apartment Building Investors.