Having rehabbed over 470 properties in
the last seven years and collected over 600 apartment units I’m often asked,
how can I become wealthier faster investing in real estate?
While most investors concentrate on some
aspect of single family houses, I was always interested in multi-units
(apartments) first, and then single family homes as a means of getting more
multi-units.
From the very beginning of my investing
in real estate, I liked the idea that a group of people (the tenants in a
building) would get together and pool their money to pay down the mortgage
on a property, and I liked the idea that they would also pool their money
together to pay for all of the maintenance work for a building.
I especially liked the idea that they
would give an owner so much money that the owner would have a bunch of money
left over at the end of every month that could be used to either re-invest,
save or to go out and have a good time with.
Essentially, I like the idea that other
people were willing to help make me wealthy. I liked it even more when I
started using management companies to manage my properties and no longer had
to have contact with my tenants.
I soon came to realize that I could also
wholesale, retail, pre-foreclosure, rehab, subject to and lease option
apartment houses as well.
I also realized that there were certain
advantages that investing in multi-units buildings had over single families.
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The first was cash flow. Cash flow on
a multi-family is always greater than that of a single family. Simply
because you have more rents coming in.
The more units you have under one roof, the less risk you have. If you
have a single family house and you lose your tenant, you’ve lost 100% of
your income. In some instances, this could be your entire profit for the
year. If you had a three family and lost a tenant, you still have two
rent coming in to pay your expenses.
-
Economies of scale are in mulit-unit
buildings. If you have six single family houses opposed to one six
family, you have six roofs to be replaced or repaired, six lawns to be
maintain, six tenants spread out through out your city or town.
In your six family you have one roof, one lawn and your tenants are
centrally located. Economies of scale are in your favor.
-
There’s a lot less competition than
there are in single family houses. Why? Because no one is out there
teaching how to do it and all the single family guru’s make flipping
single family houses sound as easy as chewing gum in the dark. The smart
investors put multi-units in their portfolios along with single family
houses.
-
Because of the bigger cash flows, you
can afford to hire management companies to manage your tenants, thus
eliminating that hassle while you go out and do what you do best (or
should do best), find and finance them.
-
Your pay days are a lot bigger when
you finally sell your property. This is because an apartment complex
cost more than single family homes, because of this they obtain a
greater dollar amount of appreciation. For example, a $100,000 single
family house will in a market that appreciates 10% will be worth
$110,000 while a three family house worth $300,000 in the same market
(10% appreciation) will increase to $330,000. That’s $20,000 more money
in your pocket!
You’ve know a few people who have made a
lot of money flipping single family houses, but if you think of the all the
people you know who have become extremely wealthy through real estate,
you’ll realize that they did it through owning multi-units (apartments).
These are the five biggest advantages to
investing in multi-units, there are many, many more. If you are interested
in creating more wealth at a faster rate, adding multi-unit to your
portfolio is the way to do it!
David Lindahl, also known as the “Apartment King has been
successfully investing in single family homes and apartments for the
last eight years. He is the author of four popular, money making
home study courses “Apartment House Riches? “How To Estimate And
Renovate House For Huge Profits?“Managing For Maximum Profits?and
“The Real Estate Investors Marketing Tool Kit? He can be reached at
dave@rementor.com and www.rementor.com.
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